The World Bank has approved a EUR70 million modernization project for Romania’s tax authority ANAF, the institution said in a statement.
The modernization project, which will be implemented by ANAF, aims to increase effectiveness and efficiency in the collection of taxes and social contributions, increase tax compliance, and reduce the administrative burden on taxpayers to comply with their responsibilities under the country’s tax laws.
Modernization of revenue administration is an important component of the Government’s economic reform program. Despite recent fiscal adjustment efforts, the external environment in Europe and weak growth in Romania will continue to pose a risk to macroeconomic stability, the World Banks said in its statement.
“ANAF has laid a solid foundation for the next generation of revenue administration reforms that will span the next five years. ANAF has decided that the next reforms will focus on fighting tax evasion, reducing the administrative burden on taxpayers, and increasing collection efficiency and the project is contributing to these goals. A modernized ANAF will be fair, taxpayer service-oriented, and effective in identifying tax evaders, and it will, as a result, reduce evasion. The restructuring of ANAF and the reengineering of business processes is vital to the Ministry of Public Finance’s objective to increase revenue as a share of GDP,” Bernard Myers, task team leader and senior public sector management specialist, said in the statement.
According to the World Bank, revenue performance gains during the boom years of 2004-2007 were modest with the revenue-GDP ratio rising from 27.2% to 29%, while revenue losses during the recession were severe, with tax-GDP ratio dropping back to 27.2% in 2010. Romania’s tax efficiency index is one of the lowest in EU countries, at 54% and 61% for VAT and social contributions respectively.
Investments in key government institutions, including and not limited to revenue administration, are an important pre-condition for Romania to continue its convergence with the European Union, the World Bank added.
Romania’s government agreed with the International Monetary Fund, the European Commission, and the World Bank to reorganize ANAF and redistribute the activity of the institution’s current 221 offices into eight regional units and 47 local offices.