The World Bank’s Board of Executive Directors has endorsed a Tax Administration and Statistical System Modernization Project for the Kyrgyz Republic in the amount of $35 million from the International Development Association (IDA), which include $17.5 million as a concessional credit and $17.5 million as a grant, the World Bank said.
The Project has two focus areas. First, the tax administration component of the Project will be implemented by the State Tax Service under the Government of the Kyrgyz Republic with an objective to improve the effectiveness of tax collection while making it easier for firms and citizens to pay their taxes.
Due to weak tax administration, the burden of taxation rests disproportionately on a small number of formal firms, in turn incentivizing informality. According to the 2020 Doing Business report, the Kyrgyz Republic made paying taxes easier by implementing an online platform for filing and paying taxes. However, tax compliance costs have remained high: significantly above the Europe and Central Asia (ECA) region and OECD average.
The new Project will involve creating a taxpayer-friendly tax administration system that provides high quality online services. To this end, the Project will support a full and systematic modernization of business processes to enable more effective and efficient tax administration, relying on compliance risk management and data analytics and providing comprehensive taxpayer services. Thus, the Project will also finance modernization of the tax administration IT system, including significant enhancements in software and hardware and improved information exchange with entities through the existing Kyrgyz interagency information exchange system, Tunduk. The Project will also help strengthen the tax administration system by improving human resources capacity of the State Tax Service and supporting integrity initiatives.
“An effective, transparent and credible tax administration system will reduce the share of the shadow economy, and the country will have more internal resources for social and economic projects,” said Bolormaa Amgaabazar, World Bank’s Country Manager in Kyrgyz Republic.
The second, statistical component of the new Project will be implemented by the National Statistical Committee with the goal of helping fill key data gaps, modernize data collection, storage, dissemination, and ultimately improve evidence-based policymaking.
The Project will finance enhancement of human resources capacity in statistics, modernization of the statistical and IT infrastructure, including provision of statistical software and equipment to the National Statistical Committee headquarters and offices country-wide; digitalization; improving the capacity of municipal civil servants responsible for collecting statistics at the level of cities and villages. The Project will introduce the usage of international standards and methodologies to improve international comparability of Kyrgyz statistics and the integrity of the national statistical system.
“Statistics are essential in monitoring the achievement of the goals of poverty reduction and shared prosperity,” Bolormaa Amgaabazar said. An improved statistical system will enable the Government and international community to target, measure and track results of development programs and plans. “With more accurate and timely statistical information the policy-makers could make better-informed decisions and ensure more efficient allocation of resources”.
The Tax Administration and Statistical System Modernization Project will advance digitalization and development of e-economy, and thus contribute to a better investment climate and private sector development in the Kyrgyz Republic. In line with the Kyrgyz authorities’ emphasis on eliminating corruption in the public sector, the World Bank will apply its anti-corruption measures to ensure transparency in the project implementation process and proper use of funds. The Project will be implemented throughout 2020-2025.
