20221214-IMF-Republic_of_Moldova_Technical_Assistance_Report-Performance_Assessment_Report_87页_1mb

Summary of the Republic of Moldova Technical Assistance Report - Performance Assessment Report

Core Content

This report presents the findings of a Tax Administration Diagnostic Assessment Tool (TADAT) performance assessment of the Republic of Moldova, conducted from September 19 to October 4, 2022. The assessment evaluates the country's tax administration system across nine Performance Outcome Areas (POAs) and 32 high-level indicators, with scores ranging from A (best performance) to D (inadequate performance). The goal of the assessment is to identify the current state of tax administration, highlight strengths and weaknesses, and provide a basis for reform priorities.

Main Strengths

• Good service provision on the website: The STS website offers a wide range of information and is accessible to taxpayers.
• Well-developed processes for institutional risk management and business continuity planning: These processes are documented and structured.
• Good dispute resolution mechanism: A three-stage review and appeal process is in place, and the Appeals division is independent.
• Strong communication channel with tax intermediaries: The STS maintains effective communication with intermediaries.
• Emerging focus on taxpayer compliance costs: Efforts are being made to reduce compliance costs, though not fully implemented.

Main Weaknesses

• Outdated IT systems: These do not support modern tax administration functions and lack interoperability with other agencies.
• Absence of automated data exchange for risk management: This limits the ability to effectively manage compliance risks.
• Immature compliance risk management: The process is not well-integrated into strategic planning and lacks prioritization.
• Lack of a risk-based approach in VAT refunds: Manual processes and no automated verification system are in place.
• Poor practice in audit program planning and monitoring: No operational plan with KPIs is in place, and audit effectiveness is not measured regularly.
• Inadequate taxpayer register: Overreliance on the Public Service Agency (PSA) means the register is not fully reliable.
• Limited effectiveness of tax accounting: Delays in posting payments to taxpayer accounts and poor refund processing.

Key Performance Outcome Areas and Indicators

POA 1: Integrity of the Registered Taxpayer Base

• P1-1: Accurate and reliable taxpayer information – Score: D

  • The State Tax Register (STR) does not contain all filing and payment obligations.
  • No assurance is provided by internal or external audits on the accuracy of the VAT sub-registry.

• P1-2: Knowledge of the potential taxpayer base – Score: C

  • STS inspections to identify unregistered businesses are not based on third-party data.

POA 2: Effective Risk Management

• P2-3: Identification, assessment, ranking, and quantification of compliance risks – Score: C

  • No systematic use of external data for risk identification or environmental scans.

• P2-4: Mitigation of risks through a compliance improvement plan – Score: C

  • The Compliance Program has broad strategies but is not fully resourced.

• P2-5: Monitoring and evaluation of compliance risk mitigation activities – Score: C

  • The Compliance Risk Committee is not active.

• P2-6: Management of operational risks – Score: C

  • Regular staff training is not fully implemented, and no external audit of the Business Continuity Plan (BCP) has been conducted.

• P2-7: Management of human capital risks – Score: D

  • No independent third-party review of human resource operations in the last seven years.

POA 3: Supporting Voluntary Compliance

• P3-8: Scope, currency, and accessibility of information – Score: B

  • The website provides a wide range of data, but not all taxpayer segments are adequately addressed.

• P3-9: Time taken to respond to information requests – Score: A

  • 98% of calls are answered within 6 minutes.

• P3-10: Scope of initiatives to reduce taxpayer compliance costs – Score: D

  • No routine review of common mistakes or misinterpretations by taxpayers.

• P3-11: Obtaining taxpayer feedback on products and services – Score: C

  • Feedback is obtained through the website, but independent surveys are rare.

POA 4: Timely Filing of Tax Declarations

• P4-12: On-time filing rate – Score: B

  • On-time filing has been improved, but not fully realized.

• P4-13: Management of non-filers – Score: D

  • No automated systems to identify late or non-filers; penalties are not automatically generated.

• P4-14: Use of electronic filing facilities – Score: C

  • Electronic filing is high for VAT, CIT, and PAYE, but only 21.2% for PIT.

POA 5: Timely Payment of Taxes

• P5-15: Use of electronic payment methods – Score: A

  • All core taxes must be paid electronically.

• P5-16: Use of efficient collection systems – Score: A

  • Withholding at source, advance payments, and other collection mechanisms are mandatory.

• P5-17: Timeliness of payments – Score: B

  • Large taxpayers do not fully meet VAT payment deadlines.

• P5-18: Stock and flow of tax arrears – Score: C+

  • Core tax arrears exceed 20% of total collections, with over 75% of arrears being more than 12 months old.

POA 6: Accurate Reporting in Declarations

• P6-19: Scope of verification actions – Score: D

  • Only a small proportion of audits are risk-based, and no operational audit plan is in place.

• P6-20: Use of large-scale data-matching systems – Score: D

  • Weak IT systems and lack of interoperability limit data cross-checking.

• P6-21: Initiatives to encourage accurate reporting – Score: B

  • The STS website provides binding public rulings, but private rulings are rare.

• P6-22: Monitoring the tax gap – Score: C

  • Skills in estimating the tax compliance gap are developing, but not yet incorporated into compliance planning.

POA 7: Effective Tax Dispute Resolution

• P7-23: Existence of an independent dispute resolution process – Score: A

  • A three-stage review and appeal process is in place, with independent Appeals division.

• P7-24: Time taken to resolve disputes – Score: B

  • Over 90% of administrative reviews are completed within 60 days.

• P7-25: Degree to which dispute outcomes are acted upon – Score: A

  • STS regularly monitors and analyzes dispute outcomes to improve procedures and legislation.

POA 8: Efficient Revenue Management

• P8-26: Contribution to government tax revenue forecasting – Score: B

  • STS provides regular input to the Ministry of Finance (MoF) but does not monitor tax losses or credits.

• P8-27: Adequacy of the tax revenue accounting system – Score: D

  • Payments to taxpayer accounts often take longer than three business days.

• P8-28: Adequacy of tax refund processing – Score: D

  • No automated risk-based verification system for VAT refund claims.

POA 9: Accountability and Transparency

• P9-29: Internal assurance mechanisms – Score: B

  • Audit trails are in place, but surveillance tools are not widely used.

• P9-30: External oversight of the tax administration – Score: C+

  • No external authority investigates taxpayer complaints.

• P9-31: Public perception of integrity – Score: C

  • A mechanism for monitoring public confidence exists, but it has not been repeated since 2018.

• P9-32: Publication of activities, results, and plans – Score: B

  • Annual reports are published within six months, but some plans are delayed.

Key Findings and Recommendations

• The State Tax Service (STS) has made progress in improving taxpayer services and implementing risk-based practices.
• The core weakness lies in the outdated IT systems and inadequate compliance risk management.
• Automation and data exchange are lacking, which hinders the ability to identify and manage compliance risks effectively.
• Taxpayer compliance costs are being addressed, but no systematic review of errors or misinterpretations is in place.
• Dispute resolution and some revenue management processes are performing well, but refunds and arrears management require improvement.
• The TADAT framework provides a comprehensive structure for assessing tax administration performance and is supported by a range of indicators and measurement dimensions.

Conclusion

The Republic of Moldova has a tax administration system that is partially functional, with improvements in service delivery and dispute resolution, but major deficiencies in IT infrastructure, compliance risk management, and data automation hinder its effectiveness. The TADAT assessment highlights the need for reforms in IT systems, risk-based audit practices, and more systematic approaches to taxpayer compliance and feedback. The STS is working on these issues, and the TADAT Secretariat has reviewed and cleared the report, indicating that the findings are reliable and objective.