THE World Bank is considering Kyrgyz Republic's proposed project to improve effectiveness of its tax collection and national statistical system.

Named' Tax Administration and Statistical System Modernization Project' (TASSMP), it is slated for consideration and approval by WB's Board on 28th February 2020, according to a WB's Project Information Document (PID).

Kyrgyz Republic's State Tax Service (STS) developed a Strategy for Tax Administration Reform for 2019-2022. The Strategy is designed to implement reforms that will improve STS effectiveness and efficiency and reduce the compliance burden for taxpayers.

The Strategy is aligned with the Government of the Kyrgyz Republic (GoKR's) Vision 2040 and Medium-Term Development Program "Unity, Trust, Creation" for 2018-2022 (MTDP).

The STS is responsible for administering and collecting direct and indirect taxes at the national level and the local level, as well as Value Added Tax (VAT) on goods and services traded within Eurasian Economic Union (EEU). The core taxes in the Kyrgyz Republic accounted for 12.6 percent of GDP in 2018 and include VAT, Corporate Income Tax (CIT) and Personal Income Tax (PIT).

As put by PID, "complex and outdated core business processes inhibit the STS from moving forward with modernization. As a result, the STS' automation efforts have yielded limited efficiency gains and improvements in tax administration processes and the quality of taxpayer services".

PID says: "Ineffective tax administration operations also hamper the STS's efforts in tackling the informal economy. The estimated size of the country's shadow economy is 37 percent of GDP. Due to weak tax administration, the burden of taxation rests disproportionately on a small number of formal firms, in turn incentivizing informality".

The STS and the National Statistical Committee (NSC) will be responsible for the management and implementation of the TASSMP.

The Project would have five components: 1) STS Institutional Development, 2) STS Operational Development, 3) NSC Institutional Development, 4) NSC Data Development and 5) Project Management.

NSC's Development Strategy for 2020-2024 is aligned with the GoKR's Vision 2040 and envisions significant steps toward digitalization, greater utilization of administrative data, including data on tax revenues, based on the government systems interoperability, streamlining of the National Statistical System (NSS) institutional relations and settings, and improvements in statistical education.

The indicators for measuring improvements in the statistical system performance and its successful modernization include: Reduced VAT gap; b) additional net taxes assessed per field audit; c) Reduced time required to comply with tax requirements as reported in Doing Business; d) Overall efficiency gain, i.e. reduced time between completion of data collection and release of key statistical indicators (such as GDP, Financial, External Trade, and Poverty and Income statistics) to the public; and e) Openness of official statistical data across 21 data categories.