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2 Project Development Objective Implement an EU-compliant, efficient, and sustainable revenue collection system that facilitates private sector development Complementary objective: separation of central and municipal revenue collection

3 Basic Facts Original project cost:€58.8 million, o.w. €31.9 million Bank financing Duration: close to 6 years (August 2003-June 2009) World Bank actual disbursements: €21 million out of an original allocation of €32 million 58 contracts signed and completed under the project Project development objectives fully achieved. Highly satisfactory performance maintained throughout project implementation

4 Basic Facts: Cost of Project Components Actual Costs per Component, million euro

5 Key results: Significant Revenue Increase Tax and Social Contribution Revenues, BGN billion Source: NRA

6 Key results: Highest Revenue Gains Among the New Member States Tax and SC Revenues Increase, , % of GDP Annual GDP Growth Rate, , % Source: Eurostat and World Bank staff calculations

7 Key results: Lowest Tax Burden NMS: Total Tax Rate, % of Profit Source: Doing Business 2010 Bulgaria: Tax and Social Contribution Rates, 2002 and 2008, %

8 Key results: Lower Compliance Costs Online filing, % declarations filed online  Simplified laws and procedures  Stable tax legislation  Integrated revenue collection for taxes and social contributions  Improved taxpayer/contributor services promoting understanding of laws and procedures  Increased use of e-filing and e-payment  Special focus on large and medium- sized taxpayers and contributors Source: NRA Still more work is needed to further reduce taxpayer compliance costs

9 Key results: Efficiency of Revenue Collection Improved Collection cost, % of Revenues Source: NRA  Field offices were consolidated from 340 in 2002 to 29 currently and 7 offices soon  Revenue per revenue staff tripled in 2008 compared to 2002  Revenues are collected by 25% less staff in 2008 compared to 2002  Collection costs in Bulgaria much lower than in NMS—0.8 percent of revenues  Efficiency of audits improved—less audits but more enforced revenue per audit Consolidating Sofia operations would further increase efficiency of NRA and taxpayers

10 Key results: Voluntary Compliance Increased for All Tax Types Compliance rates, % Source: NRA  VAT compliance now one of the highest in the EU  CIT compliance increased by 13 percentage points  PIT and social contribution compliance increased by 7 percentage points Additional tax policy and administration measures needed to improve PIT and CIT compliance

11 But Some Unfinished Business Consolidate Sofia office network Implement second phase of Revenue Management System Increase use of e-filing Decrease taxpayer compliance costs Consolidate Sofia office network Implement second phase of Revenue Management System Increase use of e-filing Decrease taxpayer compliance costs Refurbished Building of NRA in Varna Design of Sofia Building of NRA

12 Key Revenue Administration Reforms  Implemented institutional arrangements able to manage evolving revenue collection challenges of the country  Implemented capacity to conduct compliance studies, analyze proposed bills, policies and regulations  Implemented strategic focus to management, strong HR and integrity management capacity  Streamlined, optimized, and automated business processes  Implemented ICT infrastructure and core functions of integrated revenue management system  Improved taxpayer services and external and internal communications  Absorbed capacity for project management and change management  Upgraded field and headquarters office facilities

13 Key Factors Affecting Outcomes  Strong political commitment and support from MOF  Active management board representative of key stakeholders  Competent, committed, dynamic and high integrity NRA leadership  Clear vision of organization’s mission and future from the outset  Use of strategic management  Evidence of early success—transfer of municipal fee collection  Timely implementation of modern legislative framework  High level of accountability of management and staff  Excellent project and change management  Continuous feedback from staff, taxpayers and stakeholders

14 Lessons Learned  Revenue administration reform is a multi-year effort that need to be understood and sustained by successive governments  Ownership by top government ministries and implementing agency are key  Integration of revenue collection involves multiple stakeholders with varying concerns and interests. This can be addressed by stakeholders actively participating in the management of the process  Performance standards for revenue administration must be set and continuously measured and evaluated  Continuity of positive leadership is another key factor  e-Tax systems are essential to reduce compliance costs but implementation may be complicated by legal obstacles  Early changes to legal framework are crucial to provide clear and sufficient legal basis for the reform  Early wins are crucial to build confidence in the reform

15 Bulgarian Revenue Administration Reform A success that need to be replicated to other parts of public administration