STATE TAX SERVICE. Moldova State Tax Service Development Plan for

Transcription

1 STATE TAX SERVICE Moldova State Tax Service Development Plan for Chisinau 2010

2 CONTENTS: Introduction... 5 Chapter I. Purpose. Vision. Values Chapter II. Examination of the Internal Environment Institutional Activity, Financial Planning, Procurement and Internal Control Tax Administration and Compliance Processes and Procedures Use of Information Technologies in Tax Administration Human Resources Management Chapter III. Analysis of External (PEST) and Internal (SWOT) Situation PEST Analysis (Political, Economic, Social, Technological Factors) SWOT Analysis (Strengths, Weaknesses, Opportunities, Threats) Findings and Conclusion Chapter IV. STS Development Priorities for : Promote Institutional, Organizational and Legal Framework Reforms Improve the Legal Framework, Propose Amendments, as Necessary, to Enhance Transparency, Eliminate Inconsistencies, Ensure Completeness and Alignment with Government Policies Establish Modern Functions of Internal Control and Internal Audit and Update the Current System Establish an Efficient Structure and Organization for the Implementation of Tax Administration Tasks Introducing (application) the public-private partnership in the national economy areas of activity with high risk of tax evasion Provide STS with proper working conditions Modernization of Taxpayers Compliance Approach A. Increase Taxpayer Compliance A.1. Develop a General Compliance Strategy A.2. Review the Large Taxpayer Administration Programs A.3. Develop a Risk Management System for Persons with Very High Income A.4. Develop Comprehensive Integral Policies to Prevent and Fight Tax Evasion and Fraud B. Increase Operational Efficiency by Restructuring the Techniques for Execution of Tax Administration Processes B.1. Analyze Current Tax Administration Processes and Procedures to Increase Their Efficiency, and Identify Flaws B.2. Develop and Implement Schemes to Eliminate Gaps in Tax Administration Processes and Procedures B.3. Monitor and Update Continuously Tax Administration Processes C. Voluntary Compliance Facilitation C.1. Develop and Implement the Taxpayers Service Strategy, as Part of the General Compliance Strategy C.2. Simplify Procedures for Calculating, Reporting and Payment of Tax Obligations and Increase Taxpayers' Satisfaction C.3. Expanding the Range of Services for Taxpayers through the Development and Implementation of Efficient Automated Information Systems that Will Ensure Information Exchange between Tax Authorities and Taxpayers Increase Efficiency of Using Information Technologies in Support of Tax Administration Develop and Unify an Integrated Information System within the STS Extend the Range of Informational Resources and Increase Data Quality, Design a Comprehensive Taxpayers Database that Would Capture Information Made Available by Third Parties Maximize the Use of the Integrated Information System Implemented by the STS by Taxpayers and Internal Subdivisions

3 Ensure Information Security Modernize Hardware in Line with Technological Advantages Matching the Information System Requirements. Develop Communication Networks Ensure Efficient Management of Human Resources Develop and Implement a Human Resources Development Strategy Implement and Develop Performance Management. Streamline the Process of Evaluating Job Performance of STS Staff Continuous Professional Development of Staff. Establish the STS Training Center and Build Its Capacities Chapter V. Cost Estimate of Plan Implementation Chapter VI. Monitoring, Evaluation and Reporting Annexes: Annex 1. Organization of the State Tax Service Annex 2. List of relevant public policy documents and reference normative acts. Annex 3. Cost estimate of the plan s implementation (detailed), expected benefits, performance criteria for implementation monitoring and assessment 3

4 Acronyms RM The Republic of Moldova STS State Tax Service MSTI The Main State Tax Inspectorate Territorial STI Territorial State Tax Inspectorate ISTS STS integrated information system NDS National Development Strategy of RM IDP Institutional Development Plan of the Ministry of Finance for GD Government Decision MTEF Mid-Term Expenditure Framework ESRP The Economic Stabilization and Revival Plan for APIESRP The Action Plan for the Implementation of the Economic Stabilization and Revival Program for GAP The Government s Activity Program European Integration: Freedom, Democracy, Welfare APGAP The Action Plan for the Implementation of the Government s Activity Program European Integration: Freedom, Democracy, Welfare CCCSF Coordinating Council of Heads of STS from the Commonwealth of the Independent States IOTA Intra European Organization of Tax Administrations IMF International Monetary Fund SIDA Swedish International Development and Cooperation Agency CCECC Center for Combatting Economic Crimes and Corruption AIS Automated Information System VAT Value Added Tax IT Information Technologies IDC Information Data Center 4

5 Introduction 1. STS is a centralized system of tax bodies, including the activity of tax officers employed by such bodies, aiming at carrying tax administration functions in conformity with tax legislation; it is a state body and its activity aims at ensuring collection of taxes, duties and other mandatory payments to the budget which are further used for state development, social assistance and protection to population. 2. STS is a public institution that interacts daily with citizens and businesses from the Republic of Moldova and therefore, administrative measures taken by tax officials are seen as part of government policy. The national tax service has the obligation to facilitate the work of the business community by establishing clear and comprehensive reporting procedures, modernizing tax control procedures -by increasing the efficiency and reducing the number of such controls, combating corruption among tax officials and ensuring adequate transparency of STS activities. 3. The STS pursues a tax policy that is aimed at maximizing convenience for taxpayers, minimizing tax reporting costs for businesses, and addressing other similar issues facing the taxpayers, which should lead to increased tax compliance in general. 4. Tax revenues are a major contribution to the budget and the Moldovan government is focusing both on the collection of these revenues and on implementation of modern, fair and consistent measures of tax administration. With this goal in mind, the STS needs a comprehensive mission, priorities, objectives and an implementation plan, in order to be able to realize a major reform in tax administration. This reform is needed especially in the current situation and its implementation will bring institutional benefits for the STS and for the country as a whole. The need of qualitative changes in tax administration is dictated by diversification of relations and forms of cooperation, improvements in management mechanisms and technological processes, development of information technologies, but also the need to keep pace with business developments. 5. The Development Plan of the State Tax Service for the years (hereinafter - the Plan), is a complex document, which sets out the development priorities for tax administration in the Republic of Moldova along with general and specific goals needed to achieve these priorities. Yearly activity plans for the State Tax Service shall be based on the actions listed in the Plan. 6. The plan is elaborated in the context of ongoing national reforms and builds on the main activities of the Government as included in the National Development Strategy for the years , namely create conditions to increase living standards of the people by strengthening the foundation for strong sustainable exclusive growth. The Plan takes into account the provisions of the Mid-Term Expenditure Framework, the Economic Stabilization and Revival Plan, the Action Plan for the Implementation of the Economic Stabilization and Revival Plan for , the Government s Activity Program European Integration: Freedom, Democracy, Welfare the Action Plan for the Implementation of the Government s Activity Program European Integration: Freedom, Democracy, Welfare, and laws governing tax field and the recent national and international best practices in the area, as well as the IMF recommendations. 7. This plan is consistent with provisions of the Government Decision on the rules governing the development of policy documents, No. 33 of January 11, 2007 On elaboration rules and unified requirements towards the policy documents and the Methodology for the drafting of institutional development plans of central public authorities, approved by a Government Decision No. 2-d on January 23, 2008, and aims to establish priorities and organizational planning in the State Tax Service. 5

6 Chapter I. Purpose. Vision. Values. 8. The purpose of this Plan is to further promote the spirit of voluntary compliance of taxpayers in declaring and paying their tax liabilities; to improve tax civism by establishing a coherent framework of partnership relations with business and citizens, based on trust and mutual support, providing best and competent solutions, embodied in a set of high quality automated services rendered with the most recent information technologies and harmonizing tax legislation of the Republic of Moldova with international standards of tax administration. Another basic purpose is concluding multi-lateral agreements of assiduous and effective communication, as necessary to achieve the shared goals of State Tax Service and other stakeholders, which include taxpayers, media, public and private institutions and organizations, STS staff, international organizations. 9. Vision: A modern and efficient tax administration, able to provide services and assistance based on advanced information technologies, enjoying respect and trust among taxpayers due to its high performance and automated servicing, reduced costs, highly skilled staff and high standards of conduct. 10. STS Reform is based on following values: 1. Legality - strict observance of tax legislation by STS staff. 2. Transparency - results of the State Tax Service are public and can be monitored by citizens, in accordance with the law; 3. Responsibility - principle under which employees of the State Tax Service are accountable to the civil society and the law; 4. Professionalism and performance - incorporate the necessary qualifications and experience appropriate for professional activity; 5. Fair treatment - principle under which all employees of the State Tax Service provide equal treatment to all the taxpayers, without discrimination and consistent with the principles of objectivity, impartiality and legality. 6

7 Chapter II. Examination of the Internal Environment 11. This chapter analyzes the key management issues - available resources and functional / structural consistency of STS. A careful review of these issues reveals the STS capacity to achieve the proposed objectives and implement tasks outlined in the normative documents. 12. Since its establishment the State Tax Service of Moldova has passed through several stages of development and modernization of tax administration procedures, and is currently on the verge of implementing significant innovations in declaring goods and property that will govern its work for the coming years in line with its commitments to the taxpayers. 13. During the period , tax administration of Moldova faced new demands and problems, including structural, organizational, financial and informational issues. However, through concerted efforts of STS staff and adherence to the common interests of the institution, the tax service managed to bring about positive changes with regard to its main objectives of promoting tax reform and modernization Institutional Activity, Financial Planning, Procurement and Internal Control 14. Responsibility for the drafting of tax legislation rests with the Ministry of Finance, while the STS is responsible for implementing the tax administration policy and participates in improving the tax laws by formulating proposals to amend or change it. The Tax Code is amended and supplemented annually in line with major business developments, diversification of relations and forms of cooperation, improvement of management mechanisms and technological processes, development of information technologies. 15. STS activities are financed through the annual budget law. Thus, under Law 133-XVIII of December 23, 2009, the total budget approved for the STS in 2010 was million lei. 16. Procurement of goods, works and services is done in accordance with the Law on public procurements 96-XVI of 13 April 2007, and Regulation on public procurements of small value, approved by Government Decision nr. 148 of 14 February The public procurement system has a high level of transparency. Procurements are made through public tenders. The share of procurements contracted through open tender procedures and competitions is decreasing yearly, accounting for 41 contracts in 2006 (64%), 44 contracts in 2007 (62%), 38 contracts in 2008 (38%), and 19 contracts in 2009 (35%). 17. Decision making (internal control) within the STS includes a whole set of systematized actions designed to ensure systematic collection of information on the current situation, identification of effective ways to solve problems, implementation of tasks, adoption of decisions and their implementation, monitoring of activity and evaluation of results. Decision making takes place at a: a) Higher level: MSTI management (includes the chief of the MSTI and three deputy chiefs) - consists of orders and decisions on strategic organizational issues and major problems, priorities of STS activity, structural and functional organization, cooperation with other institutions; b) Medium level: management of subdivisions (heads of the territorial tax inspectorates, heads of departments and divisions within the MSTI), - which have modern business methods and techniques used to achieve the objectives, organization of trainings, efficient management of their staff and resources etc. c) Lower level: Heads of departments and sections within the territorial tax inspectorates are responsible for the direct and individual management of staff, their education and training in accordance with the Code of Ethics for civil servants, monitoring and evaluation of their work, submitting proposals on bonuses or penalties, etc. 7

8 18. Teamwork is of high priority in the process of decision-making. In order to solve major problems facing the organization, the MSTI has set up a Coordinating/Steering Council, made up of 11 members, offering them various opportunities to exchange views on the discussed issues. Committees and working groups are established in different areas of activity. 19. Decision making is based on the principle of policy coordination at all stages with all subdivisions concerned, problems identification and analysis, assessment and coordination of activities to eliminate problems at all stages and with all STS subdivisions. Annual work plans may serve as an example in this regard. Prior to their drafting, MSTI organizes consultations with its subdivisions, to discuss priority actions that need to be undertaken in order to implement strategic development plans, by taking into account the new government policies, experience, performance and available resources. At the same time, it should be mentioned that not all necessary elements for efficient operation of an internal control system are implemented at STS, and those already implemented have flaws that need to be identified and eliminated. 20. Strategic documents are consulted with stakeholders (government institutions, subordinated structures, international organizations) and foreign experts (IMF, BIZTAR, IOTA, etc.). STS external communication with stakeholders and the media is moderate. A communication strategy will be developed in the future to help with external communication Tax Administration and Compliance Processes 21. Among the main objectives of ongoing development of the State Tax Service is increasing the level of tax compliance, which in turn should reduce the gap between the tax that should be collected and amounts actually being collected. 22. Certain progress was registered during the last years in modernizing tax procedures and processes which are essential elements of the tax system operation. STS introduced new procedures for initiating and implementing tax controls; a new subdivision was created to prevent tax fraud and cooperate with other law enforcement agencies, which aims to combat tax evasion more efficiently and strengthen and cooperate better with other relevant institutions. This has resulted in the identification of new tax evasion schemes and has strengthened and improved coordination between the State Tax Service and law enforcement agencies, by establishing a mechanism for completing and transmitting materials to law enforcement agencies. 23. In early 2010, STS created an analytical and logistics division for tax administration, which aims to analyze the economic activity of taxpayers based on market development and risk assessment, study tax evasion (avoidance) as a phenomenon, from the perspective of projecting possible tax evasion schemes, both active and hidden, outlining priorities in tax administration and improving resource management. 24. To raise the level of voluntary compliance, in 2010 STS started to have regular meetings with taxpayers involved in similar activities. During these meetings, STS provides information about tax laws, explains the rights and obligations of taxpayers and listens to their needs and expectations. Such meetings resulted in higher revenues to the national public budget (collected in eights months of 2010 MDL 9,360.6 million, eight months of 2009 MDL 8,883.2 million) and significant reduction of budget losses due to tax evasions schemes. 25. In order to view electronically qualitative and quantitative performance indicators achieved by the State Tax Service during its activity, as well as to identify gaps in a timely manner and take maximal efforts to address them efficiently, the STS has developed a performance appraisal system. At the same time, lack of standards for tax contestation procedures, tax control, effective procedures for taxpayers systematization, identification of persons evading tax payments, systems for processing dubious tax returns, lack of other documents and procedures, including VAT refunds do not allow both for effective work with taxpayers and prompt responses to tax evasions and their prevention, decrease of tax arrears. 8

9 However, during the last years tax processes and procedures have been developing slowly, which delays a number of tax administration activities, while the business community is progressing fast. It allows for more and more sophisticated tax evasion schemes, less revenues to the budget. In such circumstances modernization and renewal of tax procedures and processes is needed. 26. During the last years the number of taxpayers increased significantly. Thus, as of January 1, 2001, according to the State Tax Registry, 66,755 legal entities were registered, while as of January 1, 2010 already 127,429 legal entities were registered, i.e. approximately twice as many. The number of individual taxpayers increased in the same manner. The need to increase efficiency of work with taxpayers, the taxpayer service quality to facilitate voluntary compliance is obvious. 27. Better information to taxpayers about their rights and obligations is a prerequisite to ensure an improved tax culture (civism) and better relations with tax authorities. For this purpose, STS is regularly providing information about new amendments to the tax code, other laws and regulations governing the process of tax administration. 28. It is also essential to have the necessary IT tools for managing tax reports (returns) and promote filing of electronic tax returns (remotely) by all categories of taxpayers. Thus, an alternative to the paper based tax return is the automated information system "electronic declaration ", which is a method of reporting electronically via the Internet with the application of digital signature. To date, 1048 taxpayers have registered as users in the e-declaration system. In 2009, a total of 1063 tax returns were filed electronically, i.e. 0.08% of total number of reports - 1,409,969. During six months of 2010, a total of 1595 electronic declarations were submitted or 0.2%. 29. AIS "Quick declaration" is a new tax reporting method to be used by individuals and legal entities alike. This system should help taxpayers avoid mistakes and arithmetic errors while completing their returns. In 2009 already 2000 returns ( or 0.14%) were filed under this procedure. In the first half of 2010, 27,900 quick declarations were filed or 3.0% from the total of returns. Of course, growth is evident, but the trend could be objectively assessed after a longer time period. 30. Parallel to the above measures, STS developed its new portal: which allows taxpayers to quickly access needed information. Moreover, to diversify and extend the support offered to taxpayers for better understanding and use of tax laws, the website includes a special rubric that is complex and easy-to-access "Questions -Answers ", which provides solutions to the most common problems faced by taxpayers. 31. In its desire to strengthen the partnership relationship with companies and individuals (taxpayers), based on respect, fairness and transparency, STS established in 2009 a Call Center, which in 2010 was changed to the Division for taxpayer assistance. The main tasks of the Department include free consulting services, provided by telephone to all taxpayers from Moldova, as well as written responses to questions, initially received from individuals, but starting with June 2010 also from businesses. Key partnership relations have been expanded and new ones established, for the development of education and legal assistance for better compliance among taxpayers. 32. Although we have achieved significant results in taxpayer service during the last years, still currently the expectations of taxpayers regarding the quality of services provided are growing, since they compare them with services provided to taxpayers by the tax administrations of other states or by other national institutions Use of Information Technologies in Tax Administration 33. The IT and communications infrastructure supporting the activity of the STS has evolved since early 90-s. Throughout these years software was developed based on the burning needs arising during operation and due to supplementing or amending STS s attributions. Systems were developed in an unstructured manner and weren t based on any strategic development plan. Some order was imposed through the approval of the STS s Development Strategy for , which also included some important actions related to the development of the IT&C Infrastructure and automated programs for 9

10 data management. In the same period, under Government decision 1065 of September 19, 2008, the state enterprise "Fiscservinform" was established which is a scientific and technical entity with responsibility to manage and develop the information system of the State Tax Service, based on implementation and application of modern information technologies. 34. According to the STS Development Strategy for , a number of IT systems have been implemented lately, which allowed achieving significant results in the area of taxpayer service, such as: An infrastructure was created that allows partial access of taxpayers to electronic tax services. Taxpayers have the possibility to submit tax returns and tax reports electronically; Interaction between the State Registration Chamber and the Ministry of Justice regarding state registration of legal entities and non-commercial organizations according to the one-stop shop principle was ensured; The Tax Cadastre Informational System was implemented, to keep track of real estate used as housing, commercial or industrial premises; The system for keeping track of cash registers with tax memory was implemented, which allows receiving on-line and analyzing data in cash desk checks for currency exchange operations registered at currency exchange offices. 35. Technical infrastructure is a basic element of the STS integrated information system. To ensure continuous functionality, data protection and interaction with other national information systems Data Information Center was created which is a technical and informational structure that includes equipment necessary to carry out main function, namely process and store tax information. 36. At the same time, currently a combined environment of modern and outdated databases and development platforms is used. Applications were initially developed for FoxPro databases, while this technology is already outdated and incompatible with modern approaches, in particular with web-based solutions. This is the reason why it is impossible to develop new applications for analysis management of the STS s functional processes in the future. These applications require re-engineering and modernization through changing the technical concept of the current infrastructure. 37. In addition, due to the lack of a single strategy for IT development, these systems were conceived and developed independently, using different platforms, architectures, and database management systems. Thus, a number of issues arose, such as the existence of the same classifier in several systems, separate registration of users in each system, inclusion of new tax returns and tax statements in different systems, and unjustified duration of system inquiries execution. All these shortcomings reduce significantly the efficiency of tax administration Human Resources Management 38. In accordance with Government Decision of the Republic of Moldova 735 of 16 June 2003, the STS has a total staff of 1,942 persons, including: the headquarters and territorial state tax inspectorates 1,713 (in 2001 STS had a staff of 3,170 persons). During ten years the total staff decreased by 39%, while the number of economic agents legal entities increased about two times. 39. To identify, develop and make best use of the skills of its staff, STS has developed job descriptions and put in place a performance appraisal system. Participatory management, development of human resources and teamwork are also used. 40. STS strongly promotes an institutional culture based on the following values: competence, credibility, commitment to service, transparency, performance, team spirit. 41. Currently. professional trainings for STS staff are not regular. Trainings are organized mainly by the Academy of Public Administration under the President of the Republic of Moldova. STS initiated the creation of a training center designed to meet professional development needs of tax officials. However, the training center is not yet functional. STS acknowledges the need for intensifying in some cases initiating even continuous professional development of civil servants through in-house 10

11 (within the STS) and external (outside the STS) trainings, using various forms: short and long term training courses (at home and abroad), seminars, roundtables, workshops, and different methods: lectures, case studies, discussions, role plays, presentations. 42. The current motivation system is often viewed as just a system of bonuses. Little attention is paid to motivating staff in different ways. Because of this, employees tend to carry out their tasks just at an acceptable level. This approach towards motivation results in lower quality of service. Given the rigid wage system, it is necessary to implement alternative forms of motivation, which directly contribute to more efficient activity of civil servants. 11

12 Chapter III. Analysis of External (PEST) and Internal (SWOT) Situation 43. Any public organization works in a specific environment that is influencing and driving the management s actions. Based on the influence of internal and external factors, STS has defined its short and medium term priorities, assessed risks and mitigating measures, and opportunities which may help the institution carry out its activities over this time horizon. 3.1 PEST Analysis (Political, Economic, Social, Technological Factors) 44. Taking into account the specific nature of its work, STS has identified a number of external factors impacting on various activity lines. 45. Political factors. Political factors have a major impact in determining priorities and establishing the necessary measures/actions when it comes to STS activity. This category may include the following factors: a. The influence of politicians and other organizations with a significant impact on public life (media, NGOs), in certain areas of general interest. b. Government policies and strategies set out priorities, goals and directions of activity to be implemented by the State Tax Service. In this context, the STS should mobilize its internal human, financial and technical resources, in order to fulfill these responsibilities. Policy/political documents set by Government and Parliament may also determine changes in organization (the emergence of new structures, reorganization of others (regional tax offices)), management style, orientation toward other partners (public, national, international). International cooperation and the EU' Neighborhood Policy are very important because they imply new strategies and financial instruments. Moldova's integration into the European Union requires advanced professional skills and efforts. In this context, it is critical that tax administration policy be focused on streamlining tax procedures and improving infrastructure in line with the best international practices. International cooperation in tax administration takes place through the following international and regional institutions: Intra-European Organization of Tax Administrations (IOTA) Coordinating Council of Heads of Tax Administrations from the Commonwealth of the Independent States (CCCSF) Key international and regional treaties in tax administration area, to which Moldova is a party: - Cooperation and mutual assistance treaties - Treaties outlining the principles for indirect tax collection - Double Taxation Treaties 46. Economic factors. Budgetary-fiscal policy plays an important role in the STS work, in particular amendments made during the year to the already approved budget. The economic cycle the country goes through is accompanied by decrease in production, decline in business activity and thus reduced possibilities for taxpayers to pay their tax liabilities. The Republic of Moldova, as many other countries, faces challenges due to the global economic and financial crisis. 47. Social factor have an indirect impact on STS activity. Both economic agents and the entire population are interested in tax administration policy, and their expectation are oriented to stability in social protection system, reduced corruption, simplification of tax procedures and increased 12

13 transparency. It should be mentioned that such factors as access to public information regarding the projects developed and implemented by the STS may also have an impact on STS work. 48. Technological factors. Traditional business resources - people, machines, materials, money -are complemented these days and at least in the nearest future by a fifth resource - information technologies. Given the speed of growth of the global and national IT markets, as well as facilities provided in developing specific activities, STS should analyze these factors from the perspective of its priorities for the medium term SWOT Analysis (Strengths, Weaknesses, Opportunities, Threats). 49. SWOT analysis was used to identify the STS strengths and weaknesses. Results are shown in the table below: Table 1. SWOT Analysis Strengths Budget revenue growth Transparency in decision making and openness to the mass media and civil society Willingness to collaborate with internal and external partners Reducing bureaucracy by proposing the introduction of simplified administrative procedures, increased number of e-returns and e-services Initiating inter-institutional collaboration Human resources are generally highly skilled (high proportion of staff with higher education) Awareness and acceptance of reform within the STS, ability to face up to new challenges. Opportunities Use of technologies that reduce business costs Simplifying tax administration requirements Support from external partners Raising awareness of civil society and social dialogue partners to improve services to taxpayers. Greater interest towards the quality of human resources management at national level. Weaknesses Small collection of arrears and lack of modern procedures for forced collection Lack of risk-based selection of cases for tax control Changing tax laws create undue burdens for taxpayers and tax administration Inadequate internal control system Insufficient financial and material resources Inadequate working conditions in some territorial state tax inspectorates The training system managerial staff is not properly developed Tax management processes are not in line with modern requirements Excessive focus on tax control instead of promoting voluntary compliance among taxpayers Information system is not integrated and unified Obsolescence of equipment Threats Tax frauds are major challenge Shadow economy undermines voluntary compliance Tax evasion schemes become ever more sophisticated low level of trust in State Tax Service integrity from the civil society Budgetary restrictions and limitations. Loss of qualified, trained and specialized staff 13

14 3.3. Findings and Conclusion 50. Bearing in mind midterm national priorities included in the National Development Strategy, the Institutional Development Plan of the Ministry of Finance, the State Tax Service will contribute to improving and strengthening taxpayer compliance, increasing fiscal civism, will raise taxpayer services to a qualitatively new level and, if needed, will apply enforced collection measures and measures to combat tax fraud. Hence, STS needs to increase its capacity as tax administration, to manage all current processes and procedures and the ones to be developed and implemented in the future, by focusing on its key principles and values. After performing the analysis mentioned before, a number of findings and conclusions can be mentioned: (1). During the last years tax administration procedures and processes have become increasingly outdated and complex, they do not meet current requirements. Requirements regarding taxpayer services and tax administration support technical equipment and IT, human resources integrity are increasing. Also, it is necessary to reflect in the legal fiscal framework the requirements of the EU on legislation, and the number of activities that do not fit in the scope of STS s functions is increasing, which makes tax administration even more complicated. It is obvious that there is need to develop new development directions, based on structural change, more efficient tax administration through minimizing costs and increasing promptness of actions. Directions for development: Modernize and simplify tax administration procedure, restructure tax administration systems and processes. (2). Following the globalization, recession, the integrity of taxpayers and the level of their compliance have been decreasing, while evasion from payment of tax obligation is increasing. From this perspective, it is necessary to revise the taxpayer compliance strategy, increase the use of risk-based compliance analysis. During the last tens of years the number of individuals with very high income has increased significantly, while their contribution to the budget is proportionally minimal. Globalization, strengthening of relations with the international business community, development and increasing complexity of the tax evasion systems, use of opportunities provided by the Internet increase the scope of opportunities for tax evasion. Reduced economic growth in the Republic of Moldova, just as globally, determined the decrease of taxpayer compliance. Direction for development: enhanced taxpayer compliance. (3). According to international practice, the higher the quality of services provided, the higher the level of voluntary taxpayer compliance. Currently, taxpayers expectations towards the quality of services provided by the STS increase and dissatisfaction of taxpayers with the quality of services lower than expected is increasing. Taxpayers can compare the quality of services provided by the STS with the quality of services provided by other authorities, such as financial institutions, with the quality of services provided by tax administrations in the CIS, EU, and other countries. Just as tax authorities in other countries, the STS is striving to enhance service quality, which would lead to higher taxpayer compliance. Direction for development: enhance the quality of taxpayer services. (4). Requirements to increase support to tax administration result from the need to modernize and increase the efficiency of tax processes, according to the best international practices. Developing modern processes does not determine by itself higher budget revenues unless such processes are not supported by modern services: IT, education/training, and infrastructure. 14

15 The current IT system is hampering STS development, as it was up to date 20 years ago. The level of IT development allows additional opportunities for budget revenues collection, higher efficiency of fiscal processes and staff activity. Globally, major improvement of tax administration has taken place, which allows strengthening human resources management, better performance, better knowledge, less corruption, and development of highly qualified staff. Modernization of infrastructure will lead to enhanced compliance, higher efficiency of activity. Ensuring a proper infrastructure will allow increasing satisfaction of the STS staff and improve quality level of services provided to taxpayers. Direction for development: enhance technical equipment, implement modern informational technologies, and develop human resources management. Chapter IV. STS Development Priorities for The key development objective of the STS is to modernize the tax administration process through continuous promotion of voluntary compliance of taxpayers regarding submission of tax returns and payment of taxes, to enhance fiscal civism by creating a unitary framework for transparent partnerships with the business environment and individuals, based on mutual trust and support. To achieve this objective, a major reform of tax administration is needed. 52. During the last years, STS has registered some progress, but changes are less than expected when it comes to the promotion of the key objectives of the modernization reform, namely (a) informational systems; (b) organization structures; and (c) taxpayer compliance systems management. 53. This reform is necessary, in particular given the current situation, and its implementation will benefit both the country and national institutions. The key strategic direction of the STS for the following years is to develop into a modern efficient European tax administration that will provide the most optimal environment for taxpayers, so that they comply with their fiscal obligations in an adequate manner. To implement the proposed ideas, the STS has embraced a number of new values that imply increase of budget revenues and steady reduction of the fiscal gap, in particular higher transparency, fair treatment of taxpayers, high quality relationships with individuals, services adapted to their needs, professionalism and fairness in relations with the business environment and the society. 54. The STS s development plan is based on a fundamental revision of processes and procedures that will enhance the capacity to provide taxpayer services in an effective manner, in order to encourage voluntary compliance, as well as maximize revenues collection. To support these investments, a key strategy is needed regarding personnel development, as well as the provision of a proper IT system. 55. Being aware of the need for change, the State Tax Service has identified the following development priorities for the tax administration reform: 1. Promote institutional, organizational and legal framework reforms. 2. Modernization of taxpayer s compliance approach. 3. Increase the efficiency of using informational technologies in tax administration. 4. Increase the efficiency of human resources management 15

16 4.1: Promote Institutional, Organizational and Legal Framework Reforms 56. The STS' institutional reform is the pillar priority of tax reform and is designed to ensure a consistent, stable and harmonized tax administration, operating in the most efficient manner and aligned to the best international practice. The administration is facing increasing demands towards its resources and therefore, it should constantly keep pace with the latest trends of modern tax administrations. 57. A modern tax administration has political autonomy to run its daily managerial and operational activities, independently of political changes. Taxpayers tend to have greater confidence in the STS when it shows fairness, impartiality, honesty, integrity and professionalism, and has developed transparent systems and procedures. STS has the ability to design and implement its own operational policy. A clear description of fiscal bodies responsibilities at the central and local level is contained in the Tax Code, which is the fundamental legal act regulating the activity of the STS, but also in other legal texts. 58. Internal control plays an important role in tax administration, and includes a whole set of actions aimed at collecting information on the current situation, identifying effective ways of solving problems, adopting and implementing decisions, monitoring and evaluation of results. To make internal control more efficient, it is necessary to implement a system of risk identification and mitigation, which would allow detection of risks as soon as possible and respectively, mitigating their negative impact. General Objectives: 1.1. Improve the legal framework, formulate proposals to amend the legal framework as necessary to enhance transparency, eliminate inconsistencies, ensure completeness and alignment with Government policies; 1.2. Establish modern functions of internal control and internal audit and update the current system; 1.3. Establish a structure and ensure an efficient and effective organization for the realization of tax administration tasks; 1.4. Introducing (application) the public-private partnership in the national economy areas of activity with high risk of tax evasion Provide STS with proper working conditions Improve the legal framework, formulate proposals to amend the legal framework as necessary to enhance transparency, eliminate inconsistencies, ensure completeness and alignment with Government policies 59. The general principles of taxation in the Republic of Moldova, the legal status of taxpayers, tax authorities and other stakeholders, principles for determining the object of taxation, liability for infringement of tax legislation and procedures to appeal against actions taken by tax authorities are provided by the Tax Code and other regulations adopted pursuant thereto, published officially and in force for the period fixed for the payment of taxes. The legal framework of the Republic of Moldova, including tax area, is constantly being improved. This objective aims to exclude flaws in tax laws in order to avoid ambiguous interpretation of legislation, remove inconsistencies in normative and legislative acts and adjust laws to changes in business environment Improving the legal framework also requires adjustment to international standards by adopting the best practices of developed countries. According to legislative provisions, the Ministry of Finance is in charge of developing tax legislation, while the STS is responsible for tax administration policy implementation and participates to the tax legislation improvement by formulating amending and supplementing proposals of it. 16

17 STS seeks to develop proposals to amend the laws in order to maintain a comprehensive, clear and transparent tax legislation, covering all national programs and/or international laws, codes and agreements, that can be properly implemented and clearly define taxpayers' rights and obligations. 60. To achieve this general objective, STS proposes the following specific objectives: Participate to the legal framework improvement by formulating proposals for its continuous updating bearing in mind trends in the business environment; Develop and update current normative acts related to tax administration Establish Modern Functions of Internal Control and Internal Audit System and Update the Current System 61. In order to face up to the challenges and demands set by various stakeholders and requirements defined by the legislation of the Republic of Moldova and to ensure a modern and efficient tax administration, able to provide services and assistance based on modern information technologies, enjoy respect and trust among taxpayers, STS must re-engineer its activities and change its approaches, as needed, to maximize efficiency. STS obligations should be clearly reflected in its mission, vision and objectives and, for this purpose, STS will develop policies outlining its goals, benchmarks and operational plans. STS should have enhanced accountability for its operations that should be subject to internal control and evaluations, by introducing internal audit systems to assess STS operations and performance. STS activity should be managed in accordance with performance tests and indicators, as agreed with stakeholders, while the results of its activities should be monitored constantly by applying performance management models. The role of internal control and internal audit is fundamental for the effective and efficient organization of STS activities. Internal control is a process designed to help with the organization of activities and achievement of objectives and is a means by which the STS resources are managed, monitored and measured. Internal control plays an important role in preventing and detecting fraud and safeguarding the STS s reputation. Internal audit helps the STS to achieve its objectives by evaluating, through a systematic and methodical approach, processes of risk management, control and management and making proposals to strengthen the effectiveness and efficiency of risk management, control and management processes. 62. To achieve this general objective, STS proposes the following specific objectives: Conduct a feasibility study regarding the current status and effectiveness of internal control, in order to identify and remove flaws; Drafting and introducing a modern system of internal control; Develop and improve the system of internal audit Establish an Efficient Structure and Organization for the Implementation of Tax Administration Tasks 63. A modern tax administration is organized in a way that enables it to face up to the most important commercial risks and meet its key priorities. Administration decides on its structure, functional organization and allocation of resources to cover its operational needs. To ensure the efficiency of tax administration reform, STS should optimize its structure based on the best international practices. Structural optimization will reduce tax administration costs and significantly improve taxpayers' services at a new qualitative level. 17

18 STS intends to strengthen the capacity of its offices, by moving tax control and forced collection functions to a regional level and also to create regional taxpayers assistance and enhance services to taxpayers by expanding correspondence and consultations by phone. Operational strategic planning is done by the MSTI headquarters, while the departments of MSTI are able to develop national programs and provide technical advice and guidance to territorial units. Operational functions at central and territorial level should be consistent, without duplication or overlapping risks. Organizational structure should allow more decision making with regard to taxpayers at the territorial level. To increase the efficiency of STS s activity it is necessary to revise obligations, in order to identify and eliminate functions that are not relevant for the key activity of STS. To facilitate access to different information, STS will enhance transparency of decision making for taxpayers, by creating the necessary conditions for their participation in decision-making which is expected to have a positive impact, because taxpayers will have the possibility to express their views and recommendations on decisions taken. This will increase taxpayers' understanding of decisions that might affect them directly and will improve the mechanism of education in the spirit of voluntary compliance and responsibility. At the same time, STS will provide information about its activity to the civil society. 64. To achieve this general objective, STS proposes the following specific objectives: Conduct a feasibility study to increase the efficiency of the headquarters functions, identify activities that do not correspond to STS s key functions, establish the opportunity of transforming the territorial state tax inspectorates into regional state tax inspectorates; Implement clear rules governing the relationships established between the STS headquarters and territorial offices; consistency in operational functions at the central and territorial level, without duplication or overlapping of risks; International cooperation with a view to adopt the best practice and exchange information; cooperation and collaboration with various public institutions in the country; enhancing transparency in decision making, updating and improving information of any kind in any accessible and appropriate way Introducing the public-private partnership in the national economy areas of activity with high risk of tax evasion. 65. In order to reduce the tax gap and increase the taxpayers compliance a special role belongs to a new tool of tax administration: to the public-private partnership. It is known that in some economic areas of activity tax administration is facing shortages of human, financial, technical, resources etc. This tool will allow the private sector involvement in solving the appeared problems, and the invested resources will bring benefits both to the budget, as well as to the investors. 66. To achieve this general objective, STS proposes the following specific objectives: - Identifying areas of the national economy with high-risk degree of tax evasion; - Conduct feasibility studies on the current situation in each of the national economy areas with high risk degree of tax evasion; - Involve the public-private partnership to implement new tax administration methods and procedures in the identified national economy sectors and their monitoring Provide STS with Proper Working Conditions 67. One of the objectives of STS development is the trend to modernize the working conditions for its staff. To increase STS efficiency, improve working conditions for its staff and create a comfortable 18

19 environment for taxpayers, so that they are treated not only with maximal professionalism, but also in adequate conditions, STS would need appropriate premises, modern communications infrastructure (e.g. video-conferencing system). 68. To achieve this general objective, STS proposes the following specific objectives: Conducting a study in order to identify the needs of STS in order to ensure propee working conditions; Buying immovable property and necessary equipment and providing the technical and communicational infrastructure, as needed to implement a new method of communication with territorial state tax inspectorates and taxpayers Modernization of taxpayers compliance approach 69. Achieving objectives under this priority allows solving three important problems. 4.2A. Increase taxpayer compliance 4.2B. Increase operational efficiency by restructuring the techniques for execution of tax administration processes. 4.2C. Facilitate voluntary compliance. 4.2A. Increase Taxpayer Compliance 70. One of the key objectives in the continuous development of the STS is increasing taxpayers fiscal discipline, which, in its turn, would determine maximal effects in reducing the gap between planned revenues to be collected and effective revenues collected. General Objectives: 4.2A.1. Develop a general compliance strategy; 4.2A.2. Review the large taxpayers administration programs; 4.2A.3. Develop a compliance risk management strategy for persons with very high income; 4.2A.4. Develop comprehensive integral policies to prevent and fight tax evasion and fraud. 4.2A.1. Develop a General Compliance Strategy 71. STS faces increasing challenges related to taxpayer compliance in an environment where there is tax evasion, shadow economy. Major compliance problems are associated with VAT taxpayers. These problems contribute to a significant fiscal gap. To direct STS tools towards the highest compliance risks and ensure optimal improvement for compliance behavior, there is need for a functional mechanism, i.e. a taxpayer compliance strategy. The strategy will aim at identifying major risks for revenue collection, which will allow focusing efforts with major impact for increasing compliance and decreasing the fiscal gap. 72. To achieve this general objective, STS aims at achieving a number of specific objectives: - Effectuate an analysis of internal and external information that would allow the development of a strategy focused on increasing revenues and decreasing the fiscal gap; - Ensure implementation of the strategy through the development of operational plans. 4.2A.2. Review the Large Taxpayers Administration Programs 73. Approaches focused on the tax base of taxpayers to which a large part of the state s income is due will be implemented, through full highlighting of the real tax base, identification of real amounts of taxable income, with their full timely transfer to the budget. 19

20 Currently, taxpayers to which a large part of the state s income is due are classified as large taxpayers and served by the Large Taxpayers Department of the Main State Tax Inspectorate. To increase the efficiency of large taxpayers administration a different approach to services, tax control, and forced collection is needed, as well as the development of a system for identification of compliance risks related to large taxpayers. Also, it is important to establish clear and transparent criteria for determining the status of large taxpayer, in order to eliminate subjective approaches and the influence of the human factor when assigning this status. The specialized department for administration of large taxpayers must be oriented towards ensuing tax revenues through better compliance, more efficient tax control and management of fiscal arrears, and provision of better services. 74. To achieve this general objective, STS aims at achieving a number of specific objectives: - Establish clear criteria for determining the status of large taxpayer; - Develop a risk assessment system related to large taxpayers compliance; - Profiling large taxpayers on areas of activity; - Strengthen functional and control capacity of the Large Taxpayer Department. 4.2A.3. Develop a Compliance Risk Management Strategy for Persons with Very High Income 75. There are significant compliance-related risks that were not examined, namely regarding taxation of individuals with very high income. According to international practice, in most developed countries such persons are a significant source of budget revenues, and respectively, identifying and minimizing the impact of these risks will contribute to increase the national budget income. Major risks are associated to such persons, due to their extremely complex financial arrangements and high tax payment potential. Such persons are associated with another type of risks than large companies due to higher mobility and different accounting, reporting, etc. requirements. In this context, specialized programs for addressing the complex issue of administrating individuals with very high income need to be initiated and, possibly, there is need to establish a specialized unit, similar to the Large Taxpayer Department, which will work with such persons. Also, there is need to develop clear and transparent criteria for determining the status of person with very high income. 76. To achieve this general objective, STS aims at achieving a number of specific objectives: - Develop a comprehensive risk assessment system related to the compliance of persons with very high income; - Develop a compliance strategy to manage risks related to persons with very high income. 4.2A.4. Develop Comprehensive Integral Policies to Prevent and Fight Tax Evasion and Fraud 77. Tax fraud has severe consequences on the budget, leading to violation of the principle of fair and transparent taxation, distorting competition and thus distorting the business environment and affecting significantly the functioning of the domestic market. Honest businesses are disadvantaged from the viewpoint of competitiveness due to tax fraud, and losses of fiscal revenues are covered in the end by honest taxpayers, through other forms of taxation. Globalization implies nowadays more and more difficulties in combating tax fraud. In addition, there are a range of internal challenges, as well as limited resources, legislative loopholes, imperfect internal work methodology, etc. which also make it difficult to fight tax fraud. STS policy for preventing and fighting tax evasion and fraud will reflect all possible problems, as well as ensure promotion of a taxpayer compliance culture. 20

21 78. To achieve this general objective, STS aims at achieving a number of specific objectives: Strengthen fraud investigation capacity; Develop and implement a system for identification and elimination of tax evasion risks, which will improve tax fraud identification and annihilation. 4.2B. Increase Operational Efficiency by Restructuring the Techniques for Execution of Tax Administration Processes 79. During the last years significant changes took place in economy, society, technologies, culture, demography, which changed the environment in which tax administration operates. Taxpayers are more and more mobile and have more and more access to sophisticated technologies and services that allow them to get involved in ever more complex transactions. STS applies a number of compliance techniques, but they need a higher level of development to have sufficient impact. General Objectives: 4.2B.1. Analyze current tax administration processes and procedures to increase their efficiency, and identify flaws; 4.2B.2. Develop and implement schemes to eliminate flaws in tax administration processes and procedures; 4.2B.3. Monitor and update continuously tax administration processes. 4.2B.1. Analyze Current Tax Administration Processes and Procedures to Increase Their Efficiency, and Identify Flaws 80. Since the external environment is undergoing continuous changes and modernization, tax administration processes and procedures also require reviewing and updating. To this end, processes and procedures must undergo detailed analysis that would identify strengths and reserves that have not been used yet. 81. To achieve this general objective, STS envisages specific objectives: - Analyze the tax revenues collection process; - Analyze the tax control process; - Analyze STS institutional processes. 4.2A.2. Develop and Implement Schemes to Eliminate Flaws in Tax Administration Processes and Procedures 82. After identifying flaws in tax administration processes and procedures, schemes to annihilate those will be developed and implemented. STS is motivated to undertake significant efforts to eliminate shortcomings in tax administration and use reserves to increase efficiency, budget revenues, as well as strengthen taxpayers discipline. Even if lately revenues to the budget have increased due to the implementation of some progressive administration methods, however this segment still requires complex modernization and improvement, which would result in fewer arrears, automated collection of revenues, shorter terms of tax arrears and reduction of tax gap. Currently STS focuses its efforts on changing the planning of tax control in an efficient and effective risk-based way, ensuring its implementation during a well-defined period and area, which will guarantee achieving planned results through minimal resources, costs and efforts. Also, STS aims towards a performing institutional system that would allow efficient and effective carrying out of tax administration tasks. 21

22 83. To achieve this general objective, STS envisages a number of specific objectives: - Change and increase the efficiency of the revenue collection process; - Change and increase the efficiency of tax control; - Optimize institutional processes. 4.2B.3. Monitor and Update Continuously Tax Administration Processes 84. For efficient functioning of tax administration processes continuous monitoring is needed, through systematic collection of information, through putting in place an efficient internal control and communications system. Improvements and adjusting to technological progress and the internal and external reality of these processes will increase compliance, will reduce the time period of arrears, and will increase overall tax administration. 85. To achieve this general objective, STS aims at achieving a number of specific objectives: - Monitor and bring up to date the revenue collection process; - Monitor and bring up to date the tax control process; - Monitor and bring up to date institutional processes. 4.2C. Facilitate Voluntary Compliance 86. STS goal is to continuously promote the spirit of voluntary compliance of taxpayers when declaring and paying their tax liabilities and improve tax civism. To achieve this goal and increase taxpayers' confidence in the fairness and equity of the tax system, but also to raise their awareness of the liability for infringement of tax laws, the tax administration defines and publishes taxpayers' rights and obligations which are expressly stipulated in the Tax Code. Provisions of tax laws are not retroactive and this surely allows taxpayers to understand the consequences of their decisions. Tax administration should be done in a transparent manner, as to provide sufficient legal security to taxpayers, to strictly respect private rights, thus available information should be used only for tax purposes and submitted to other public authorities or foreign tax authorities only in specific cases defined by law. Given that the tax administration is too focused on tax control, now the general trend of the STS is changing now with the increasingly focusing efforts on improving options for taxpayers services and developing a taxpayer-oriented tax administration. This approach should facilitate voluntary compliance, increase tax civism, create favorable conditions for business and reduce tax evasion. A major objective of the tax administration is to help taxpayers honor their civic responsibility to pay taxes, by offering them high quality services, similar to those provided by other tax authorities. STS will undertake proactive measures in order to prevent possible problems from the taxpayers' perspective, to eliminate them and reduce tax compliance costs. General Objectives: 4.2C.1. Develop and implement the taxpayers services strategy, as part of the general compliance strategy; 4.2C.2 Simplifying procedures for calculating, reporting and payment of tax obligations and increase taxpayers' level of satisfaction; 4.2C.3 Expanding the range of services for taxpayers through the development and implementation of efficient optional automated information systems, which will ensure the exchange of information between tax authorities and taxpayers. 4.2C.1. Develop and Implement the Taxpayers Service Strategy, as Part of the 22

23 General Compliance Strategy 87. By reducing the time and effort required from taxpayers to understand their tax obligations, their temptation for non-compliance will be reduced and the likelihood for STS to undertake more costly interventions in the future will be also reduced. To achieve this goal, STS will undertake measures to increase transparency, to ensure equal treatment for taxpayers, to consolidate fair treatment for citizens, to implement and develop services tailored to the needs of taxpayers, to increase professionalism and fairness in relation to business and society. Taxpayers service process will be promoted actively and continuously as a part of taxpayers voluntary compliance strategy, where all elements and terminology will be defined, measured and quantified. This strategy will set out various incentives to help compliance as well as severe and efficient penalties to counter deliberate non-compliance. 88. To achieve this general objective, STS proposes the following specific objectives: Develop and implement a taxpayers' service mechanism by minimizing costs, extending the range of services provided and simplifying tax administration procedures; Provide comprehensive and accessible consultancies to taxpayers. 4.2C.2. Simplify Procedures for Calculating, Reporting and Payment of Tax Obligations and Increase Taxpayers' Satisfaction 89. To implement new services and procedures or introduce changes in the existing services and procedures, STS will use methods and conduct studies to understand the preferences of taxpayers from different segments of business and will use obtained knowledge to provide more sophisticated services and facilitate access to information and services. Whenever possible, STS will organize round tables with participation of STS staff and taxpayers representatives from concrete activity areas, to talk about changes proposed to be implemented, to discuss proposals and wishes related to such changes, so that entities impacted by these services and programs will be engaged in their shaping. At the same time, new programs will be implemented in stages, in order to identify related problems and possible solutions. 90. To achieve this general objective, STS proposes the following specific objectives: Develop and implement a system for assessing the level of satisfaction of taxpayer, that would allow for the identification of flaws in tax administration and efficient resolution of those issues; Review current tax calculation, reporting and payment procedures to simplify them; Develop and implement clear and simple systems and procedures for tax calculation, reporting and refund of taxes, fees and other payments. 4.2C.3. Expanding the Range of Services for Taxpayers through the Development and Implementation of Efficient Optional Automated Information Systems that Will Ensure Information Exchange between Tax Authorities and Taxpayers 91. STS goal is to ensure that taxes, fees and other payments are paid in the right amount and at the right time and with minimal administrative intervention. STS also aims at developing information management systems with regard to taxpayers and protecting and securing personal data. STS needs to keep balance between enforcement and service activities, as a measure to reduce the tax gap, as these represent a key tool for increasing tax compliance. 23

24 STS staff involved in service delivery should be highly skilled as to be able to meet the expectations of taxpayers; services should be available regardless of time and place and keep pace with electronic services. 92. To achieve this general objective, STS proposes the following specific objectives: Establish and monitor performance in service delivery consistent with established performance standards; increase the number of customers that use electronic services; Develop and implement effective automated information systems that provide new services to taxpayers, reduce useful time to provide quicker information to taxpayers Increase Efficiency of Using Information Technologies in Support of Tax Administration 93. Accomplishing this priority would allow for maximum possible use of IT in support of strategic plan and tax administration operations by use of flexible, stable and reliable systems. A first step in IT development would be an integrated informational system of the STS as part of the state informational resources that will be a combination of technical, technological, informational, organizational means and software meant to ensure collection, transmission and control of primary data, processing, analysis, and preparation of tax information. The integrated informational system of the STS is conceived as a complex informational system that must be used as a tool to support tax administration activity and electronic communication with taxpayers. Also, this system will contribute to creating informational resources on taxpayer activity and their relations with the state in the process of tax administration, providing accurate information to the state s leadership, public administration authorities, individuals and legal entities, according to current legal provisions. Successful implementation and operation of the integrated informational system will grant STS a number of major benefits: quality taxpayer services by improving tax administration processes, which will allow for better knowledge of and better compliance with tax legislation by taxpayers; quality taxpayer services by facilitating electronic communication: electronic submission of tax returns and tax reports, access to individual accounts, other self-service options; higher efficiency of tax collection by ensure identification and collection of arrears. STS staff will get tools adequate to their working processes, which would facilitate the exercising of their functions. General Objectives: Development and unification of an Integrated Information System within the STS; Extending the range of information resources and enhancing data quality, designing comprehensive taxpayers' database that would capture information made available by the third parties; Maximizing the use of Integrated Information System implemented by the STS by the taxpayers and internal subdivisions; Ensuring information security; Modernizing hardware in line with technological advantages matching the information system requirements. Developing communication networks. 24

25 Develop and Unify an Integrated Information System within the STS 94. As it was mentioned in point 3.3. of this Plan, the STS informational system was up to date 15 years ago, and this low level of IT affects not only the day to day activity of STS staff, but also consequences are reflected in the taxpayer service quality. The informational system used by STS for data processing, taxpayer services, tax collection was created on a basic level platform. To achieve performances according to assumed criteria it is necessary that the STS informational system meets international standards. The Integrated Informational System of the STS must ensure the carrying out both of basic functions of a standard informational system and specific functions determined by its destination, which implies provision of software applications for all areas of STS activity. 95. To achieve this general objective, STS proposes the following specific objectives: Uniform and efficient organization from the standpoint of the costs, architecture and information technologies management, as per the possibilities and needs; using generic or industrial systems/solutions so as to cut on the costs of designing and maintenance; Develop new software for the functional activity of the STS, which should allow to enhance tax administration efficiency, simplification of tax reporting, modernization of services provided to taxpayers and accordingly, raising the level of satisfaction with the latter; Revising IT software (both externally and internally managed ones) on regular basis so as to ensure compatibility, security and access to data, as well as their protection Extend the Range of Informational Resources and Increase Data Quality, Design a Comprehensive Taxpayers Database that Would Capture Information Made Available by Third Parties 96. At the extent of the last decade the contents of the STS' database remained basically unchanged. It now requires urgent updating, developing central database and creating analytical data storage. The data contained in the analytical data storage should be well structured so as to allow prompt response to users inquiry. At the same time, it will be a must to ensure uniform management of all the resources and users of information entered in the centralized information infrastructure and elaboration of an architectural project related to integration of the existing and future subsystems. With the scope of streamlining the taxpayer database cooperation with other public institutions was initiated in view of data exchange, such as CCECC, Ministry of Information Technologies and Communications, Ministry of Justice, Agency for Land Relations and Cadastre, etc. 97. To achieve this general objective, STS proposes the following specific objectives: Create comprehensive and operational taxpayers database in accordance with the requirements set forth by the STS development strategy so as to enhance the degree of satisfaction of internal and external users, and offer reports to the Ministry of Finance, State Chancellery, international organizations, etc.; Ensure cooperation with public institutions in view of ongoing exchange of information about the taxpayers. 25

26 Maximize the Use of the Integrated Information System by the STS, by Internal Structures and Taxpayers 98. Presently, the STS is not fully benefiting from its resources. Partly this is explained by the need of upgrading IT systems, as well as by the fact hat the existing model does not fully encourage the use of advanced IT instruments. In order to contribute to the process of implementation and development of the Integrated Information System Concept promoted by the STS, its employees, besides having adequate access to computers need to be trained in IT and Internet. Trainings in this area will be offered on the grounds of the Training Centre affiliated by the STS, through seminars, workshops, etc. The taxpayers will further benefit on such electronic tax services as Electronic Tax Declaration and Quick Declaration. At the same time, the infrastructure allowing taxpayers' access to electronic tax services will be completed with new services. Facilitating electronic communication for taxpayers, as well as efficient use of tax services will set grounds for better observance of the tax legislation by the latter. 99. To achieve this general objective, STS proposes the following specific objectives: Widely spread use of IT instruments and methods by the STS, increasing the number of services provided to the taxpayers through Internet, increasing the number of local network users as well as enhancing its capacity; Make more efficient the mechanism of information encoding Ensure Information Security 100. Ensuring information security means guaranteeing its confidentiality by banning access to information by the persons that are not duly authorized or vested with the respective rights, ensuring logical integrity of information by banning unauthorized input, updating or deletion of information, ensuring physical integrity of information, ensuring protection of informational infrastructure against deterioration and attempts of changing its functioning The STS proposes the following specific objectives in order to implement this general objective: Implement adequate measures meant to ensure data protection (security, contingency, defining and documenting the feedback) and ensure their revision on regular basis; Maintain IT systems security aiming to ensure taxpayers' data confidentiality and personal data protection Modernize Hardware in Line with Technological Advantages Matching the Information System Requirements. Develop Communication Networks 102. One of the key elements of the Integrated Information System of STS is its technical infrastructure. Ongoing modernization of equipment will allow for obtaining high performances of the information system. At the same time, in order to ensure ongoing functionality, protecting data and allowing for interaction with other national information systems it is necessary to ensure the infrastructure of the Informational Data Centre, which constitutes the technical and information structure, which includes the hardware required for performing basic functions, such as processing and storage of tax information. Modern hardware would allow increasing the quality level of services provided to the taxpayers, reducing taxpayers' expenses related to tax reporting, upgrading working places of STS employees and enhancing labor productivity of its staff The STS proposes the following specific objectives in order to implement its general objective: 26

27 Modernize computer equipment from working place of inspectors so as to enhance labor productivity and reduce the time required for retrieving information from the database; Ensure servers infrastructure for DATA Centre, upgrade peripheral equipment, and upgrade networks for secure communication (VPN) Ensure Efficient Management of Human Resources 104. STS needs qualified, motivated and committed human resources, in order to increase work efficiency, improve quality of services to taxpayers, increase taxpayers' satisfaction and engage in efficient cooperation with the civil society with a view to improve tax civism. STS efforts to improve the human resource management system will continue to focus on solving problems related to staff management, including: recruiting, hiring, promotion, training, etc., structural reorganization of tax bodies, promoting professional ethics consistent with the established standards and staff motivation. Tax administration should provide its employees with advanced technologies for an efficient administration of taxes. Without highly skilled and committed staff, STS will not be able to deal with the challenges of an increasingly complex external environment. STS is aware of the need to strengthen and support its staff, as needed to improve efficiency of its operations and raise the status of civil servant, as well as improve its reputation and trust, ensure that STS staff is known to the public as competent, professional and oriented towards taxpayers needs. Staff motivation and qualification are essential to achieve objectives and ensure quality of services. To optimize internal processes, which have a direct impact on external factors, it is necessary to introduce a risk management process that includes a quality management system along with improved staff planning and management. Effecient organization of internal processes is a precondition for meeting staff and taxpayers' needs, as well as for increasing the efficiency of resources invested in education, continuous training and staff development. General Objectives: Develop and Implement a Human Resources Development Strategy; Implement and develop performance management. Streamline the process of evaluating professional performance of STS staff; Continuous professional development of staff using various forms and methods of training. Establish the STS training center, and build its capacities Develop and Implement a Human Resources Development Strategy 105. Developing a human resource management strategy, policies, systems and procedures related to the realization of tax administration s objectives and staff development through training courses and professional development will enable the identification and resolution of problems related to staff management, including: recruitment, selection, hiring, promotion, training, motivation, etc. To develop the capacities related to human resources management, STS will implement a human resource management strategy, setting out the criteria for promotion, motivation system, performance evaluation and a system to meet the needs of staff To achieve this general objective, STS proposes the following specific objectives: Effectuate a HR management process feasibility study; Elaborate a human resource strategy; Continuous updating of HR strategy in line with complex changes in external environment. 27

28 Implement and Develop Performance Management. Streamline the Process of Evaluating Professional Performance of STS Staff 107. Organizing and conducting annual performance evaluations of civil servants working in the STS contributes to improved organizational performance of STS, assessment of individual professional performance, personal development and professional competence of civil servants. The evaluation process should lead subsequently to career advancement, professional training, etc. The evaluation system must determine whether the complexity of tasks corresponds to the degree and qualification of each employee, staff skills match their job descriptions, and must lead to the full use of the staff skills and knowledge as an important resource of the STS and must include other criteria such as frequency and procedures for evaluations. Job efficiency could also be increased by ensuring appropriate working conditions for STS staff, in particular by providing them with modern equipment that would increase labor productivity, facilitate access to information from the database, increase the quality of services delivered to taxpayers To achieve this general objective, STS proposes the following specific objectives: Streamline the system for staff appraisal, based on national laws and international standards in human resources; Streamline the system for providing non-financial incentives to staff and ensure transparent criteria for this system; Elaborate a labor force planning system; Elaborate an efficient communication system Continuous Professional Development of Staff Using Various Forms and Methods of Training. Establish the STS Training Center and Build Its Capacities 109. The role of professional development of STS staff is absolutely essential. However, actually trainings are only provided occasionally, without an approved annual plan and delivered mainly by the Academy of Public Administration under the Presidency of the Republic of Moldova. For training purposes, STS will prepare annual plans and programs based on a coordinated system of, complete and accurate analysis of current and future training needs, training priorities, training methods (lectures, case studies, discussions, role play, presentations) and various forms of training: short and long term training courses (at home and abroad), seminars, roundtables, workshops. STS will also need training programs to prepare managers, designed to provide managers with knowledge, skills and attitudes needed to perform their activity at a high level. In order to increase the professionalism of tax officers, STS will provide internal and external training courses outside the workplace, conducted by trainers that have the necessary qualifications and experience, using a number of methodologies which correspond to the requirement for special training. Quality assurance indicators shall be used to assess the quality and effectiveness of trainings provided. STS has undertaken an important task of establishing a training center to deliver trainings for STS employees. The center will act as an STS department, with clearly defined responsibilities. Substantial investments will be needed to establish the center, including its infrastructure at the initial stage and further operations. The center is expected to be the main provider of qualified staff in tax administration area. Initially, the center will focus on ensuring a high standard of staff training from all the structures of STS. Subsequently, the center will expand its operations and deliver trainings to taxpayers, organize conferences, forums and other forms of traning To achieve this general objective, STS proposes the following specific objectives: Elaborate and implement annual training plans for STS staff; 28

29 Raise professionalism of STS staff by providing them with diverse and continuous training, internal and external, in accordance with approved plans; Create the STS training center, provide necessary equipment and professional trainers; Develop operational regulations for the training center. 29

30 Chapter V. Estimated Costs of Plan Implementation 111. The strategic development plan cannot include a full and accurate cost assessment of the modernization programs, since the final outcome will be the development of key strategies or plans, while this chapter of the Plan will include only the costs of the Plan s implementation that do not depend on the results of the analyses Some development objectives can be commented or assessed depending on expected benefits of proposed actions. Modernization will result eventually in benefits in three areas: increased budget revenues flows; costs reduction; reduction of compliance costs for taxpayers (time, finances, etc.) Ensuring quantitative assessment of these benefits may be difficult also due to lack of exact data and uncertainty related to the ways to quantify benefits; however, for general objectives it is possible to forecast the impact on taxpayers, the STS, the society Financing the development actions of the State Tax Service will be limited to the expenditures included in the Midterm Expenditure Framework for , and in strict conformity with expenditures planned in the annual Budget Law. At the same time, to realize successfully the proposed activities, already initiated reforms and in particular to ensure logical continuity of such reforms and STS sustainable development, during the implementation of the Development Plan eventual opportunities for alternative financing that might be identified to support specific programs will be carefully studied. Implementation process is complex and unitary that requires not only financial resources but also consulting assistance to be provided both from internal sources and through collaboration with international institutions (USAID, WB, IMF, EU, etc.) Eventual general costs for the implementation of the STS modernization program as envisaged in the Development Plan for are shown in the table 2: Priority 1. Promote institutional, organizational and legal framework reforms 2. Modernization of taxpayers compliance approach Estimated Costs for Plan Implementation (MDL, thousands) , , , , , Table Increase efficiency of IT use in tax administration 30, , , , , Increase HR management efficiency 9, TOTAL EXPENDITURES 40, , , , ,

31 Chapter VI. Monitoring, Evaluation and Reporting 116. During the implementation process of this Plan ongoing monitoring of progress toward achieving objectives, use of funds and outcomes will be done, in order to make changes and updates, as needed For successful implementation of the Plan thematic working groups will be established. The working groups will report monthly to the Steering Committee on results achieved. A Deputy Chief of the Main State Tax Inspectorate will be in charge of establishing the working groups The Head of the Steering Committee, namely the Chief of the MSTI will play the main role in managing the Plan s implementation and will be in charge of the Plan s implementation in general. The Steering Committee will include Deputy Chiefs of the MSTI, the chief of STI of Chisinau Municipality. The Steering Committee will examine, assess by stages and monitor the activity of the working groups, as well as approve thematic plans to implement the objectives. The Steering Committee will summon quarterly meetings of the thematic working groups; will direct strategically the work of the groups. The Steering Committee will report every six months on the Plan s implementation to the Ministry of Finance To assess the results of implementing general objectives a number of performance criteria will be set: High performance implementation of over 85% of the established performance criteria; Average performance - implementation of 70%-85% of the established performance criteria; Low performance - implementation of 55%-70% of the established performance criteria. 31

32 Annex 1 to the State Tax Service Development Plan for

33 33

34 Annex 2 to the State Tax Service Development Plan for List of relevant public policy documents, normative acts and international organizations reports on tax administration development 1. Law 847-XIII dated May 24, 1996, on the Budgetary System and the Budgetary Process 2. Tax Code of the Republic of Moldova, 1163-XIII dated April 24, Law 93-XIV dated July 15, 1998, on Business Patent 4. Law 982-XIV dated May 11, 2000, on access to information 5. Law 1069-XIV dated June 22, 2000, on IT 6. Law 397-XV dated October 16, 2003, on Local Public Finance 7. Law 467-XV dated November 21, 2003, on computerization and the state information resources 8. Law 264-XV dated July 15, 2004, on e-document and digital signature 9. National Development Strategy for , Law 295 dated December 21, Law 71 dated March 22, 2007, on registers 11. Accounting Law 113 dated April 27, Law 61-XVI dated March 16, 2007, on Audit Activity 13. Law 158-XVI dated July 4, 2008, on the Public Function and the Civil servant Status 14. Action Plan for the Implementation of the National Development Strategy for , approved through Government Decision 191 dated February 25, Activity program of the Government of the Republic of Moldova European Integration: Freedom, Democracy, Welfare for Stabilization and Economic Revival Program of the Republic of Moldova for approved through Government Decision 790 dated December 1, Institutional Development Plan of the Ministry of Finance for Midterm Expenditure Framework for Development Strategy of the State Tax Service for approved through Government Decision 1208 dated October 20, National Strategy for Preventing and Combating Corruption, approved through Parliament Decision 413-XVI dated December 21, Central Public Administration Reform Strategy, approved through Government Decision 1402 dated December 30, Memorandum on Economic and Financial Policies of the Republic of Moldova and IMF 23. IMF Report Strengthening management compliance program 24. IMF Report on the Project The State Tax Service Development Plan for Strategy for the Reform of the Framework for State Regulation of Business Activity, approved through Government Decision 104 dated February 1,

35 26. Implementation Plan for the Strategy for the Reform of the Framework for State Regulation of Business Activity, approved through Government Decision 104 dated February 1, National Strategy for Building an E-Society E-Moldova, approved through Government Decision 255 dated March 3, Tax Reform Concept, approved through Parliament Decision 1165-XIII dated April 24, Government Decision 1450 dated December 24, 2007, on Some Measures for Enforcing Law 61- XVI dated March 16, 2007, on Audit Activity 30. Government Decision 201 dated March 11, 2009, on Enforcing Provisions of Law 158-XVI dated July 4, 2008, on the Public Function and the Civil servant Status 31. Government Decision 1736 dated December 31, 2002, on Regulating the Activity of the State Tax Service Bodies 32. Government Decision 735 dated June 16, 2003, on the Structure and Staff Limit for Decentralized Public Services of Ministries, Departments, and other Central Administration Authorities 33. Government Decision 441 dated July 21, 2009, on the Staff Limit for the State Tax Service 34. Government Decision 786 dated June 30, 2003, on Approving the Organization Chart of the State Tax Service and Abolishing some Decisions of the Government of the Republic of Moldova 35. Government Decision 562 dated May 22, 2006, on creation of state automated information systems and resources. 35

36 Annex 3 to the State Tax Service Development Plan for Cost estimate of the plan s implementation (detailed), expected benefits, performance criteria for implementation monitoring and assessment General Objective 1.1. Improve the legal framework, formulate proposals to amend the legal framework as necessary to enhance transparency, eliminate inconsistencies, ensure completeness and alignment with Government policies 1.2. Establish modern functions of internal control and internal audit and update the current system Specific Objective Participate to the legal framework improvement by formulating proposals for its continuous updating bearing in mind trends in the business environment; Develop and update current normative acts related to tax administration. Conduct a feasibility study regarding the current status and effectiveness of internal control, in order to identify and remove flaws Drafting and introducing a modern system of internal control Developing and improving the system of internal audit Action Costs by Year (MDL, thousands) Executing period Expected Benefits 1. Better understanding of legislation by taxpayers 2. Increased level of voluntary compliance of taxpayers 3. Contradictions and ambiguous interpretation of legislation eliminated 1. Higher efficiency of internal control 2. Higher effectiveness of STS staff s activity 3. Higher efficiency of tax administration operation 4. Higher information security level Performance evaluation proposals submitted to the Ministry of Finance, tax legal framework compatible with EU law, WTO rules proposals submitted to the Ministry of Finance research made, report presented to the management, approved plan of changes implementation elaborated and approved policy, elaborated and approved performance tests, elaborated and approved activity plans 36

37 1.3. Establish a structure and ensure an efficient and effective organization for the realization of tax administration tasks Conduct a feasibility study to increase the efficiency of the headquarters functions, identify activities that do not correspond to STS s key functions, establish the opportunity of transforming the territorial state tax inspectorates into regional state tax inspectorates Implement clear rules governing the relationships established between the STS headquarters and territorial offices; consistency in operational functions at the central and territorial level, without duplication or overlapping of risks 10 days Increased efficiency of tax administration activity 2. Decreased costs of tax administration 3. Higher level of taxpayer information 4. Increased taxpayer trust 5. Better image of STS research made, report submitted to the management, submitted law modification proposals performance management system for assessing the activity of the territorial state tax inspectorates prepared and approved, quality management system of the services provided by the territorial state tax inspectorates approved 1.4. Introducing (application) the public-private partnership in the national economy areas of activity with high risk of tax evasion International cooperation with a view to adopt the best practice and exchange information; cooperation and collaboration with various public institutions in the country; enhancing transparency in decision making, updating and improving information of any kind in any accessible and appropriate way. Identifying areas of the national economy with high-risk degree of tax evasion Conduct feasibility studies on the current situation in each of the national economy areas with high risk degree of tax evasion tax gap reduction; 2. implementation of new advanced methods and procedures of tax administration not less than 5 articles published, not less than 5 telecasts and broadcasts, the information to be published on the web page not later than 3 days after its approval research made, elaborated report research made, elaborated report Involve the public-private submitted proposals 37

38 1.5. Provide STS with proper working conditions 2A.1. Develop a General Compliance Strategy 2A.2. Review the Large Taxpayers Administration Programs partnership to implement new tax administration methods and procedures in the identified national economy sectors and their monitoring Conducting a study in order to identify the needs of STS in order to ensure propee working conditions Buying immovable property and necessary equipment and providing the technical and communicational infrastructure, as needed to implement a new method of communication with territorial state tax inspectorates and taxpayers Effectuate an analysis of internal and external information that would allow the development of a strategy focused on increasing revenues and decreasing the fiscal gap Ensure implementation of the strategy through the development of operational plans Establish clear criteria for determining the status of large taxpayer days* Modernization of taxpayers compliance approach 2A. Increasing the level of taxpayers compliance days* Increased efficiency of tax administration activity 2. Higher quality of services provided to taxpayers 3. Higher satisfaction of STS staff 4. Better image of STS 1. Increase tax compliance 2. Decrease the tax gap 3. Increase tax control efficiency 4. Decrease the age of arrears 5. Improve the quality of taxpayer services 1. Increase compliance of large taxpayers 2. Decrease the tax gap for large taxpayers research made and report submitted to the management, identified financing possibility, get the superior institution approval research made and report submitted to the management, identified financing possibility, get the superior institution approval General compliance strategy elaborated and approved Elaborated and implemented plans Elaborated and implemented system Develop a risk assessment Large Taxpayers Service 38

39 system related to large taxpayers compliance Profiling large taxpayers on areas of activity Strengthen functional and control capacity of the Large Taxpayer Department Improve quality of service for large taxpayers strategy elaborated and implemented Criteria system elaborated and implemented, increase the budget revenues from the large taxpayers with not less than 10%. 2A.3. Develop a Risk Management System for Persons with Very High Income 2A.4. Develop Comprehensive Integral Policies to Prevent and Fight Tax Evasion and Fraud Develop a complex risk assessment system related to the compliance of persons with very high income Develop a compliance strategy to manage risks related to persons with very high income Strengthen fraud investigation capacity Develop and implement a system for identification and elimination of tax evasion risks, which will improve tax fraud identification and annihilation Increase tax compliance of persons with very high income 2. Increase the efficiency of tax administration of persons with very high income 3. Increase budget revenues 1. Reduce damage caused to the budget by tax frauds 2. Detect and combat tax evasion schemes 3. Increase budget revenues Elaborated and implemented system, increase the budget revenues paid by persons with high revenues with not less than 10% Elaborated and approved strategy Elaborated, implemented and functional tax evasion risks identification system elaborated and implemented system, increase the budget revenue with no less than 10% as a result of frauds counteracting 2B.1. Analyze Current Tax Administration Processes and Procedures to 2B. Increase Operational Efficiency by Restructuring the Techniques for Execution of Tax Administration Processes 1. Increase efficiency of days* 2011 tax administration 2012 processes and procedures Increase the level of tax compliance Analyze the tax revenues collection process Analyze the tax control process 5 days* research made, report submitted to the management elaborated actions plans 39

40 Increase Their Efficiency, and Identify Flaws 2B.2. Develop and Implement Schemes to Eliminate Flaws in Tax Administration Processes and Procedures 2B.3. Monitor and Update Continuously Tax Administration Processes 2C.1. Develop and Implement the Taxpayers Service Strategy, as Part of the General Compliance Strategy 2C.2. Simplify Procedures for Calculating, Reporting and Analyze STS institutional processes Change and increase efficiency of the revenue collection process Change and increase efficiency of tax control 10 days* Optimize institutional processes 20 days* 15 days* 15 days* days* days* days* 30 days* - - Monitor and bring up to date the revenue collection process Monitor and bring up to date the tax control process Monitor and bring up to date institutional processes Develop and implement a taxpayers' service mechanism by minimizing costs, extending the range of services provided and simplifying tax administration procedures Provide comprehensive and accessible consultancies to taxpayers Develop and implement a system for assessing the level of satisfaction of taxpayer, that would allow the identification of 10 days* C. Facilitate Voluntary Compliance Identify and eliminate deficiencies in activity 1. Increased budget revenues 2. Decrease arrears 3. Modernize tax control 4. Increase informational security 1. Decrease arrears age 2. Increase budget revenues 3. Modernize the internal control system 4. Decrease the tax gap 5. Increase the level of taxpayers trust 1. Ensure better voluntary compliance level 2. Reduce the tax gap 3. Ensure higher taxpayer satisfaction 4. Improve cooperation 5. Minimize tax costs of taxpayers 6. Improve quality of tax services 1. Minimize tax costs of taxpayers 2. Reduce useful time for calculation, reporting, and implemented procedures and processes Decrease with no less than 10% of the appeal cases Decrease with no less than 20% of the VAT refund period Research made, report submitted to the management proposals to change the legislation submitted Decrease with no less than 10% of the storage and selling costs Modified and implemented mechanism Developed, approved and implemented strategy Increase provided consultancies by no less than 20% more; 2 training services annually; elaborated and distributed brochure developed, implemented and functional system 40

41 Payment of Tax Obligations and Increase Taxpayers' Satisfaction 2C.3. Expanding the Range of Services for Taxpayers through the Development and Implementation of Efficient Automated Information Systems that Will Ensure Information Exchange between Tax Authorities and Taxpayers 3.1. Develop and Unify an Integrated Information System within the STS flaws in tax administration and efficient resolution of those issues Review current calculation, reporting and payment procedures to simplify them Develop and implement clear and simple systems and procedures for calculation, reporting and refund of taxes, fees and other payments Establish and monitor performance in service delivery consistent with established performance standards; increase the number of customers that use electronic services Develop and implement effective automated information systems that provide new services to taxpayers, reduce usefull time to provide quicker information to taxpayers Uniform and efficient organization from the standpoint of the costs, architecture and information technologies management, as per the possibilities and needs; using generic or industrial systems/solutions so as to cut on the costs of designing and maintenance Develop new software for the functional activity of the STS, payment 3. Ensure higher taxpayer satisfaction 4. Increased taxpayers trust Increase Efficiency of Using Information Technologies in Support of Tax Administration Better quality of services provided to taxpayers 2. Increase the number of services provided to taxpayers 3. Increase the number of users 4. Improve taxpayer information 5. Minimize tax costs of taxpayers 1. Reduce useful time for calculation, reporting, and payment 2. Increase taxpayer satisfaction 3. Increase labor productivity of staff 4. Simplify tax procedures, 5. modernize taxpayer services simplified system developed and approved; all revised procedures, reports submitted to top management developed, implemented functional system; increasing the level of satisfaction** by no less than 5% performance system developed, implemented functional; increasing taxpayers number who will use e-services by no less than 20% developed and approved systems; reduce time for providing information by 10% Integrated Information System modernized in line with international practices new information systems implemented and 41

42 3.2. Extend the Range of Informational Resources and Increase Data Quality, Design a Comprehensive Taxpayers Database that Would Capture Information Made Available by Third Parties 3.3. Maximize the Use of the Integrated Information System by the STS, by Internal Subdivisions and Taxpayers which should allow to enhance tax administration efficiency, simplification of tax reporting, modernization of services provided to the taxpayers and accordingly, raising the level of satisfaction with the latter Revising IT software (both externally and internally managed ones) on regular basis so as to ensure compatibility, security and access to data, as well as their protection Create comprehensive and operational taxpayers database in accordance with the requirements set forth by the STS development strategy so as to enhance the degree of satisfaction of internal and external users, and offer reports to the Ministry of Finance, State Chancellery, international organizations, etc. Ensure cooperation with public institutions in view of ongoing exchange of information about the taxpayers Widely spread use of IT instruments and methods by the STS, increasing the number of services provided to the taxpayers through Internet, increasing the number of local network users as well as enhancing its capacity Make more efficient the mechanism of information Increase labor productivity of staff 2. Reduce useful time for reporting 3. Increase user satisfaction, 4. increase tax compliance 1. Improve taxpayer services quality 2. Increase the number of taxpayer services 3. Increase the number of users 4. Improve taxpayer information functional, raising the level of taxpayers satisfaction ** report presented to the management created database signed agreements and contracts a higher level of satisfaction** of internal users of STS database; a higher level of satisfaction** of external users of STS database information placed within 3 days 42

43 3.4. Ensure Information Security 3.5. Modernize Hardware in Line with Technological Advantages Matching the Information System Requirements. Develop Communication Networks 4.1. Develop and Implement a Human Resources Development Strategy 4.2. Implement and Develop Performance Management. Streamline the Process of Evaluating Professional Performance of STS encoding Implement adequate measures meant to ensure data protection (security, contingency, defining and documenting the feedback) and ensure their revision on regular basis Maintain IT systems security aiming to ensure taxpayers' data confidentiality and personal data protection Modernize computer equipment from working place of inspectors so as to enhance labor productivity and reduce the time required for retrieving information from the database Ensure servers infrastructure for DATA Centre, upgrade peripheral equipment, upgrade networks for secure communication (VPN) Effectuate a HR management process feasibility study Elaborate a human resource strategy Continuous updating of HR strategy in line with the complex changes in external environment Streamline the system for staff appraisal, based on national laws and international standards in human resources Streamline the system for providing non-financial incentives to staff and ensure transparent criteria for this Ensure Efficient Management of Human Resources days* days* Increase taxpayers trust 2. Improve the image of STS 1. Improve taxpayer services quality 2. Increase staff productivity 3. Increase the security of confidential information 1. Increase labor productivity of staff 2. Increase efficiency of human resources management 3. Improve the image of STS 1. Increase the level of staff professionalism 2. Ensure more ethical behavior of staff 3. Improve the image of STS 4. Increase staff satisfaction protection measures revised no less than once a year appeals on disclosure of information no more than 5% of the total number of cases in court time for selecting information from the database decreased by no more than 40% modernized Data Centre carried out study developed and approved strategy updated strategy the streamlined system for staff appraisal approved and functional the streamlined system for providing incentives to staff approved and functional 43

44 Staff 4.3. Continuous Professional Development of Staff Using Various Forms and Methods of Training. Establish the STS Training Center and Build Its Capacities system Elaborate a labor force planning system Elaborate an efficient communication system Elaborate and implement annual training plans for STS staff Raise professionalism of STS staff by providing them with diverse and continuous training, internal and external, in accordance with the approved plans Create the STS training center, provide necessary equipment and professional trainers Develop operational regulations for the training center Increase staff professionalism 2. Ensure more ethical behavior of staff 3. Improve the image of STS 4. Increase taxpayers trust approved and functional system approved and functional system elaborated and implemented plans increase the number of trained staff by 10% annually created and functional training center elaborated regulation * - expert assistance in the field, from foreign donors, total for 5 years 210 days ** - the level of satisfaction will be based on a survey 1. Euro: average exchange rate for January-June 2010, according to NBM data 2. Inflation according to IMF data: %, %, %, %, %. 44