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The World Bank Board of Directors today approved $ 50 million in funding from the International Development Association for the Tax reform operation in Tajikistan. This project will support the implementation of the revised tax code and the modernization of the tax system to reconcile the objectives of domestic revenue mobilization and private sector development.

“When the incentives are such that businesses and investors truly benefit from the success of their operations and their honesty to the state, the private sector will begin to play an increasingly important role in promoting innovation, job creation and broadening the tax base. Said Jan-Peter Olters, World Bank Country Director for Tajikistan. “A tax code consistent with predictable tax obligations, as currently prepared by the government, should promote a more dynamic, innovative and export-oriented private sector – once decisions on tax audits are made. on risk assessments and consistency checks carried out within the tax commission.

The government of Tajikistan has made tax reform a priority, reflecting the growing importance of improving the business and investment climate and enhancing the competitiveness of the national economy. With the new tax code, currently under review by the government, Tajikistan seeks to modernize tax administration and base tax policy and revenue collection processes on international practice.

This reform represents an essential element in the efforts to achieve the key objectives of the National Development Strategy for 2030, which is to increase the income of the population up to 3.5 times and to halve the poverty by 2030. To achieve this goal, Tajikistan would need the contribution of a dynamic private sector capable of financing investments, fostering innovation, creating jobs and increasing exports.

Currently, the private sector in Tajikistan provides only about a quarter of total investment and produces less than a third of industrial output, while providing only limited formal employment opportunities in a young and growing economy. The COVID-19 pandemic has negatively impacted government revenue and tax collection efforts, while increasing demand for social spending and levels of public debt. This context made tax reform even more urgent.

the Tax reform operation in Tajikistan contribute to the ongoing tax reform by: 1) simplifying the tax system; 2) improving the quality of services to taxpayers, and 3) improving voluntary compliance.

Activities, which will support these three main outcomes, include the development of the secondary legislation necessary for the implementation of the new Tax Code, the creation of a modern risk assessment methodology based on international experience to guide audits, the introduction of mechanisms for better efficiency and transparency of tax expenditures; the introduction of cost-benefit analyzes for tax incentives; the simplification of tax declaration requirements and the harmonization of tax and accounting declarations for certain taxes; the introduction of an automated VAT refund system; the automation of certain taxpayer services; upgrading taxpayer service standards based on feedback from taxpayers; the implementation of the digital signature and the upgrading of the ICT infrastructure within the Tax Commission; capacity building on modern approaches to tax policy and tax administration; and taxpayer awareness and education.

To maximize the impact of the project, the World Bank uses a financing instrument called Program-for-Results (PforR), which directly links the disbursement of funds to the achievement of specific results. The project will be implemented by the Ministry of Finance of the Republic of Tajikistan and the Tax Committee of the Government of Tajikistan over the next six years.

The World Bank is funding 21 projects in Tajikistan for a total amount of $ 1.1 billion. Since 1996, the World Bank has provided more than $ 2 billion in IDA grants, highly concessional credits, and trust funds for Tajikistan. The World Bank Group is committed to continuing to support Tajikistan as it strives to improve the lives and meet the aspirations of its young and growing population.

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