## 1albea2022003

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**Canonical URL:** [1albea2022003](https://www.imf.org/-/media/files/publications/cr/2022/english/1albea2022003.pdf)

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### PREFACE — mission, scope, and expected revenue impact
- Mission purpose and composition:
  - IMF FAD mission visited Tirana during November 4 –19, 2019 to support preparation of a Medium-Term Revenue Strategy (MTRS).
  - Mission leader: Mr. Stephen Vesperman (FAD). Team: Messrs. Paul Dempsey and Allan Jensen (FAD), Messrs. Barrie Russell and Michael O’Grady (external IMF experts).
  - Key Albanian counterparts included Ms. Anila Denaj (Minister of Finance and Economy), Mr. Elton Haxhi (Deputy Minister, MOFE), Ms. Delina Ibrahimaj (Director General, GDT), and Mr. Gjon Bardhi (Director General, GDC).
- Report scope and structure:
  - Final version of draft aide-mémoire submitted November 19, 2019.
  - Consists of an executive summary and seven sections: (i) Context of MTRS Development; (ii) Tax Compliance Gap and Current Responses; (iii) Addressing High Risk Areas of Non-Compliance; (iv) Building Institutional Capacity; (v) Improving Customs Administration; (vi) MTRS Governance Arrangements; (vii) Next Steps and External Capacity Development Support.
- Revenue potential:
  - If implemented in full, revenue administration options have the potential to raise around one percent of GDP over the MTRS period.
  - Government’s assessment: an increase of revenue of 2.2 – 3.0 percent of GDP will be required to finance additional spending needs over the next five years.

### Revenue performance, composition, and shortfalls
- Revenue underperformance:
  - On average, over the last 10 years, tax revenues underperformed relative to forecasts by close to 1.5 percent of GDP.
  - Stock of approved unpaid VAT refunds: ALL18.1 billion as at end-September 2019―up from ALL16.8 billion at end-December 2018.
  - VAT refunds for certain large taxpayers are paid by installments, contrary to international good practice.
- Revenue collected by tax type (2016–2018) — key figures (preserve source numeric presentation):
  - Personal income tax: 31.4 2.1; 32.1 2.1; 36.5 2.2
  - Social contributions: 79.2 5.4; 86.8 5.6; 93.2 5.7
  - Profit tax: 28.5 1.9; 31.6 2.0; 34.5 2.1
  - VAT: 128.1 8.7; 139.5 9.0; 143.5 8.8
  - Excises: 41.9 2.8; 45.1 2.9; 45.0 2.8
  - Customs duties: 6.1 0.4; 6.5 0.4; 6.2 0.4
  - Other taxes: 35.8 2.4; 38.5 2.5; 38.6 2.4
  - Local govt. revenue: 15.0 1.0; 18.4 1.2; 21.9 1.3
  - Total: 366.0 24.9; 398.6 25.7; 419.3 25.8
  - Note: VAT revenues are overstated as they do not reflect VAT refund arrears, which amounted to ALL16.8 billion at end-2018.
- GDT and GDC collected (ALL billions) — (2017 / 2018 / Difference):
  - GDT collected:
    - PIT: 32.1 / 36.5 / +4.4
    - Social security contributions: 82.8 / 88.7 / +5.9
    - VAT gross: 48.9 / 50.9 / +2.0
    - VAT refunds: (13.9) / (14.4) / (+0.5)
    - VAT net: 35.0 / 36.5 / +1.5
    - Profit Tax: 31.6 / 34.5 / +2.9
    - National Taxes: 12.4 / 12.9 / +0.5
    - Circulation and Fuel Taxes: 15.2 / 18.3 / +3.1
    - Gambling Taxes: 5.3 / 4.6 / -0.7
    - Administrative fines: 0.2 / 0.1 / ------
    - GDT total: 214.7 / 232.1 / +17.4
  - GDC collected:
    - VAT - Imports: 104.6 / 107.2 / +2.6
    - Excise - Imports: 38.5 / 42.7 / +4.2
    - Excise - Domestic: 7.2 / 3.9 / -3.3
    - National Taxes: 16.5 / 19.5 / +3.0
    - Customs Duties: 6.5 / 6.2 / -0.3
    - Rent Tax: 2.3 / 2.6 / +0.3
    - Scanning Fee: 1.1 / 1.1 / -----
    - GDC total: 176.7 / 183.2 / +6.5
  - GDT and GDC Total: 391.4 / 415.3 / +23.9

### Compliance challenge — indicators, impacts, and priority areas
- Key indicators:
  - VAT compliance gap estimated by the IMF to be 28 percent in 2015—almost twice the EU average.
  - One in three economically active Albanians estimated by the World Bank Group to be working in some form of informal employment in 2018.
  - Cash held outside the banking system in August 2019 was ALL288 billion or 22 percent of all circulating money.
- Consequences:
  - Informality undermines tax revenues, social cohesion, economic growth, and perceptions of fairness.
  - Tax design complexity, frequent ad hoc policy changes, and high compliance costs contribute to low “tax morale” and opportunities for artificial tax avoidance (e.g., bogus self-employment, splitting businesses).
- Priority actions for compliance improvement (Box 3):
  - 1. Reduce the VAT compliance gap.
  - 2. Reduce the cash economy, undeclared work, and underreporting.
  - 3. Tax unexplained wealth.
  - 4. Limit artificial tax avoidance.
  - 5. Reduce compliance costs, increase tax certainty, and confidence in revenue administration.

### Addressing the VAT compliance gap — findings and options
- Findings:
  - VAT fraud concentrated in construction, trade, and services; construction sector singled out for early focus.
  - Fiscalization estimated by GDT to have potential to increase VAT collection by between 10 and 15 percent when fully implemented.
- Short-term (First 12 months) options:
  - Maximize revenue-raising potential of fiscalization by ensuring monitoring and follow-up enforcement structures and risk-driven monitoring.
  - Target the construction sector early and consider introducing a ‘reverse charge’ regime to prevent losses along sub-contractor chains.
- Medium-term (One - Four Years) options:
  - Develop and implement focused CRM compliance projects for other high-risk sectors (e.g., professionals).
  - Put in place additional protections against VAT fraud, including ‘joint and several’ VAT liability and reverse charge arrangements for selected goods susceptible to fraud.
- VAT fraud protections:
  - Introduce a ‘joint and several’ liability mechanism where a person other than the person responsible for the VAT payment can be held liable if he “knew or should have known” that the VAT liability would go unpaid.
  - Frame joint and several VAT liability in line with established EU law principles to preserve legal certainty for genuinely innocent parties.
  - For product-specific risks (example: raw metals with chromium featured in a recent domestic fraud), consider reverse charge mechanism for that product.

### Reducing the cash economy, undeclared work, and underreporting — measures and options
- Key findings:
  - Responsibility for undeclared work is spread across several agencies (GDT/GDC, social insurance bodies, labor inspectorate).
  - Large mismatch between labor force statistics and registered workers; exceptional “bunching” of declared income at/below minimum wage requires investigation.
  - Current general requirement to file tax declaration limited to persons with annual income over ALL2 million; consider extending filing requirement to those with more than one source of income.
  - Less than half of Albanian adults have a bank account and only around 200,000 have e-money accounts.
- Measures to reduce cash economy (selected):
  - Reduce cost of bank account facilities and encourage electronic payments.
  - Examine prohibitions on cash dealings and compulsory bank transfer payments for significant outgoings (below current ALL150,000 cash prohibition threshold).
  - Information and awareness campaigns coinciding with fiscalization; confidential reporting channels.
  - Partner with business associations; publicize anti-evasion actions and sanitized case studies.
- MTRS Options:
  - Short-term (First 12 months): develop holistic integrated approach; improve inter-agency cooperation; extend categories required to file income tax declarations; strengthen criminal sanctions; improve analytics and data sharing.
  - Medium-term (One - Four Years): develop partnerships with business and community; improve financial statement reliability; develop government and revenue administration action plan to reduce cash economy.

### Taxing unexplained wealth and indirect audit methods
- Key measures and timelines:
  - Give auditors explicit power to assess tax liability by indirect audit methods; change tax procedure law to explicitly allow indirect methods and provide that reasonable assessments based on such methods are valid unless taxpayer can explain sources of wealth.
  - Begin automatic exchange of financial account information under the Common Reporting Standard (CRS) framework by 2020; incentivize clean-up of past offshore-related evasion through a voluntary disclosure program (VDP) in the run-up to 2020 automatic exchange.
  - Widen VDP to include undeclared domestic funds and assets—preceded by automatic reporting by financial institutions of account information of Albanian residents.
  - Ensure credible threat that VDP non-participants will be effectively dealt with; highlight establishment of a follow-up investigation task force.
  - Collect taxes evaded through corruption and other financial crimes by improving cooperation gateways between revenue agencies and enforcement bodies.
- OECD/CRS context:
  - OECD press release: voluntary disclosure of offshore assets resulted in more than €95 billion in additional revenue for OECD and G20 countries over the 2009 – 2019 period.
  - Current criminal fine cited in source: ALL10,000 or one year in prison.
- Indirect audit methods (Appendix II):
  - Methods described: Source and application of funds; Bank deposits and cash expenditure; Mark-up method; Unit and volume method; Net worth method.
  - Conditions for use: apply when reasonable likelihood of unreported income exists; legal safeguards require estimates to be reasonable and law to authorize indirect methods and reverse burden of proof.
  - Quality assurance: first cases should be subject to stringent quality assurance reviews; consider authorizing only a few highly trained auditors initially.

### Reducing artificial tax avoidance and establishing a specialist unit
- Key measures:
  - Ensure 2019 GAAR is effective and acts as a real deterrent; provide clearer guidance to business, GDT staff, and courts.
  - Enact targeted anti-avoidance measures for pervasive arrangements: ‘bogus’ self-employment and artificial business splitting.
  - Consider litmus tests of employment status in law (e.g., supervision, direction and control), disregard legal form in personal services company cases, and place burden of proof on client for contractor genuineness.
  - For artificial business splitting: allow only one threshold (example cited: ALL8 million) for related businesses and apportion threshold on turnover basis.
  - Establish a specialist anti-avoidance unit in the GDT (center of expertise to handle largest cases and provide guidance), noting current only specialist unit is transfer pricing in the LTO.

### Reducing compliance costs, increasing tax certainty and taxpayer service
- Key weaknesses:
  - No overarching taxpayer service strategy.
  - Interpretive advice inadequate; GDT’s half-yearly technical bulletin falls short.
  - VAT refunds are not paid on time; stock of approved but unpaid VAT refunds reached ALL16.8 billion at end-2018.
  - GDT not responsible for resolving first stage administrative appeals; MOFE currently takes roles that should belong to GDT.
  - Integrity assurance framework inadequate.
- Short-term (First 12 months) actions:
  - Develop taxpayer service strategy; improve interpretative guidance; improve product and process design with stakeholder interaction; ensure decision-making on individual tax outcomes resides with GDT; pay VAT refunds on time; put in place structured integrity assurance.
- Medium-term (One - Four Years) actions:
  - Engage taxpayers and intermediaries in designing laws, forms, procedures and reporting systems to simplify tax system and reduce compliance costs.
- Typical elements of a taxpayer services strategy (Box 4):
  - Taxpayer charter; stakeholder consultation; coordinated services with other authorities; tailored service delivery; e-services and prefilled returns; dedicated enquiry service for tax professionals; measurable service standards.

### Building institutional capacity — GDT modernization, CRM, workforce, and governance
- Current state:
  - GDT modernizations implemented: new IT system (2015), universal e-filing, LTO, national call center, initial CRM development, Fiscalization project (April 2020 B2C retail receipt monitoring; mid-2021 B2B mandatory e-invoicing).
  - Overall capacity remains relatively weak by international standards: outdated business model, limited third-party data access, no enterprise data warehouse (EDW), insufficiently skilled staff, absence of CAAT and decision support software, limited operational independence.
- Organizational reforms proposed:
  - Shift fiscal monitoring responsibility to Audit directorate to consolidate verification and allow Investigations to focus on serious cases.
  - Channel all telephone enquiries to national call center with escalation process; expand outbound telephone verification work.
  - Consolidate operational work into no more than three large regional offices plus LTO and national call center; convert remaining RTOs into service outlets and rationalize network.
- CRM and data analytics:
  - Liaise with NAIS for EDW as part of Fiscalization IT system; contract-in data analytics experts with skills transfer clauses; acquire modern analytics software; partner with universities to develop data analytics and behavioral science courses.
  - Short-term CRM options: liaise with NAIS; contract-in analytics experts; leadership to champion CRM and increase CRM projects.
  - Medium-term CRM options: expand third-party data access; acquire analytics software and train staff; partner with universities.
- Workforce development and Tax Academy:
  - Current Tax Academy has eight staff and inadequate accommodation; draft law to expand into genuine tax academy with intensive training (new staff 12 months combined formal and on-the-job training; existing staff moving roles 3 months).
  - Short-term workforce actions: industry training for LTO staff; targeted call center skills upgrades; acquire CAAT; authorize indirect audit methods and train auditors; recruit small cadre for intensive technical training with annual bonus and required annual statement of income and assets.
  - Medium-term workforce actions: seek assistance from universities, other jurisdictions, and professional associations.
- Increase operational independence and leadership stability:
  - Short-term: ensure GDT leadership continuity for MTRS period.
  - Medium-term: grant GDT more autonomy in organization design, budget management, HRM, and performance standards.

### Customs administration — performance, capacity-building, and recommendations
- Current performance and systems:
  - GDC collects around 43 percent of all taxes and duties.
  - Albanian customs code broadly aligned with EU rules; uses ASYCUDA with risk categorization module.
  - OECD Trade Facilitation Indicators: Albania matches or exceeds comparators for trade facilitation but room to increase Authorized Economic Operators (AEO), implement New Single Window and NCTS.
- Institutional capacity priorities:
  - Centralize risk profiling into one national center to build expertise and consistency.
  - Enhance data analytical capacity; no regular excise gap analysis; limited cross-agency and third-party data access; no data warehouse.
  - IT needs: updated ASYCUDA, integrated tariff management, improved data exchange/analysis, modern case management system.
  - Workforce: develop professional agile workforce with skills in data analytics, mathematics, economics, sectoral knowledge; invest in staff development and external partnerships.
  - Integrity framework: define, communicate, monitor, enforce, evaluate, and report on integrity.
- Key statistics — Use of Customs Clearance Channels (Single Administrative Documents) (Table 3):
  - 2014: Green/Blue Percent 0, Yellow Percent 89.20, Red Percent 10.35, Total Single Administrative Documents 415,775
  - 2015: Green/Blue Percent 0.7, Yellow Percent 88.52, Red Percent 10.26, Total Single Administrative Documents 421,987
  - 2016: Green/Blue Percent 4.01, Yellow Percent 83.67, Red Percent 11.92, Total Single Administrative Documents 451,497
  - 2017: Green/Blue Percent 6.24, Yellow Percent 85.28, Red Percent 8.07, Total Single Administrative Documents 498,789
  - 2018: Green/Blue Percent 15.87, Yellow Percent 75.60, Red Percent 8.05, Total Single Administrative Documents 540,050
  - 2019 (End 08): Green/Blue Percent 19.53, Yellow Percent 72.63, Red Percent 7.47, Total Single Administrative Documents 405,098
- Gross National Taxes Collected by GDC (ALL Million) — Table 4 highlights:
  - Circulation Tax: 2016 16,557; 2017 13,102; 2018 16,613; 2019 Jan – Oct 14,045
  - Carbon Tax: 2016 2,164; 2017 1,763; 2018 2,034; 2019 Jan – Oct 1,897
  - Mineral Royalties: 2016 2,804; 2017 2,333; 2018 2,618; 2019 Jan – Oct 2,049
  - Other: 2016 1,539; 2017 1,625; 2018 1,627; 2019 Jan – Oct 1,922
- Short-term (First 12 months) customs recommendations:
  - Increase number of Authorized Economic Operators.
  - Centralize risk profiling into one national center.
  - Improve risk filters to allow for greater than 33 percent through the Green Channel.
  - Enact legal provisions for NCTS.
  - Increase collaboration against informality, smuggling, corruption and counterfeit goods.
  - Assign responsibility for administration of all fuel related taxes to one agency.
  - Implement an integrity framework.
- Medium-term (One - Four Years) customs recommendations:
  - Continue IT investment; implement NCTS; roll-out Single Window.
  - Reduce number of special tax zones and entities.
  - Expand Green Channel further (greater than 50 percent).
  - Develop supply chain monitoring for fuel and advanced risk profiling/analytics.
  - Expand information exchange domestically and internationally.

### MTRS governance, management, and implementation sequencing
- Governance framework and roles:
  - MOFE must lead tax system reform agenda; MTRS Steering Committee chaired by Minister of Finance and Economy (or Deputy) with senior representation from key agencies.
  - MTRS Technical Secretariat small (4 people) and not full-time; recommendation to strengthen and resource a cross-agency MTRS Program Management Office (PMO).
  - Each revenue agency should have a Project Office; GDT has Project Office, GDC needs to establish one.
- PMO responsibilities:
  - Develop implementation plan, phase and schedule deliverables, outline resourcing (especially technology), develop reporting system, coordinate external stakeholder consultation.
  - Assignment of resources to MTRS PMO is urgent.
- Short-term governance actions:
  - Establish MTRS Program Management Office.
  - Strengthen MTRS Steering Committee composition.
  - Establish a GDC Project Office.
  - MTRS Steering Committee to approve MTRS draft by January 31, 2020.
  - Ensure linkages and dependencies among reforms are identified so critical reforms are prioritized and sequenced.
- External support and coordination:
  - IMF stands ready to provide ongoing support.
  - External partners interested: EU, SECO, World Bank.
  - Recommendation to establish arrangements to coordinate external support to avoid duplication and conflicting advice.

### Appendix highlights — gap analysis, governance, and implementation tools
- Appendix I (MTRS Gap Analysis) key points:
  - Revenue mobilization target not yet determined; suggested alignment with SDS 2019-2030 but interim medium-term target for next 4/5 years recommended.
  - No single comprehensive plan mapping policy, administration, and legal reforms; sequencing and quantification of revenue impacts absent.
  - Sustained political commitment, whole-of-government approach, parliamentary involvement, and multi-year resource planning needed.
  - Capacity-development support mapping and coordination across partners not yet prepared.
- Appendix II (Indirect Audit Methods) summary:
  - Lists Source and application of funds, Bank deposits and cash expenditure, Mark-up, Unit and volume, and Net worth methods.
  - Legal safeguards recommended: law should authorize indirect methods and reverse burden of proof; auditors must be well-trained; first cases subject to stringent quality assurance.
- Appendices IV–VII:
  - Design principles for laws and regulations emphasize simplicity, user involvement, coordination, and targeted enforcement.
  - Framework for reducing corruption vulnerabilities outlines 34 features across Policy and Legislation, Modern Systems and Processes, Organization and Management, Technology and Controls, People Management, and Institutionalized Promotion of Integrity.
  - Example compliance project approach and detailed MTRS governance framework with roles and critical success factors.
- APPENDIX VIII — Draft overview of MTRS Options:
  - Objective: Increase tax-to-GDP ratio by 2.2 to 3 percent of GDP in 5 years from baseline of 25.9 percent; Tax Policy reform 1.4 percent & Tax Administration reform 1 percent of GDP.
  - Broad measures listed across Tax Policy Reform, Tax and Customs Administration Reform, Legal Framework Reform, Political Support and External Resources, and an MTRS Action Plan with timeline highlights (e.g., MTRS draft January 10, 2020; Steering Committee approval by January 31, 2020; public consultation January 10 – March 30, 2020).

*Content derived from PREFACE, Executive Summary, and selected chapters and appendices of the IMF staff report (1albea2022003).*

### PREFACE

### PREFACE

### Mission purpose and composition
- In response to a request from Ms. Anila Denaj, Minister of Finance and Economy, an IMF Fiscal Affairs Department (FAD) mission in revenue administration visited Tirana during the period November 4 –19, 2019 to support preparation of a Medium-Term Revenue Strategy (MTRS).
- Mission leader: Mr. Stephen Vesperman (FAD).
- Mission team: Messrs. Paul Dempsey and Allan Jensen (both FAD), and Messrs. Barrie Russell and Michael O’Grady (both external IMF experts).
- The mission partly overlapped with a FAD mission led by Ms. Dora Benedek that provided tax policy options for the MTRS.
- Key Albanian counterparts engaged: Ms. Anila Denaj (Minister of Finance and Economy); Mr. Elton Haxhi (Deputy Minister, MOFE); Mr. Nikolla Lera (Advisor to the Minister, MOFE); Ms. Delina Ibrahimaj (Director General, General Directorate of Taxation, GDT); Mr. Gjon Bardhi (Director General, General Directorate of Customs, GDC); and many managers and staff from the respective Headquarters (HQ) of the two agencies.
- Other meetings: Ms. Mirlinda Karcanaj (General Director, National Agency for Information Society, NAIS); representatives of the Foreign Investors Association of Albania; Dr. Patrik Meier (Deputy Head of Mission, Embassy of Switzerland); Ms. Sybille Schmidt (European Union Delegation); Ms. Sarah Jurreit (Directorate-General for Economic and Financial Affairs, European Commission); Ms. Ermelinda Xhaja (Program Officer, Embassy of Sweden); and Ms. Hilda Shijaku (World Bank).
- Logistical support acknowledged: Ms. Blerina Paja (GDT) and Ms. Mirela Meko (GDC).

### Report scope and structure
- The report proposes revenue administration options for inclusion in the MTRS and represents the final version of the draft aide-mémoire submitted to the authorities on November 19, 2019.
- It consists of an executive summary and seven sections:
  - (i) Context of MTRS Development;
  - (ii) Tax Compliance Gap and Current Responses;
  - (iii) Addressing High Risk Areas of Non-Compliance;
  - (iv) Building Institutional Capacity;
  - (v) Improving Customs Administration;
  - (vi) MTRS Governance Arrangements;
  - (vii) Next Steps and External Capacity Development Support.

### Background to MTRS development
- Decision to commit to development of an MTRS was taken against a backdrop of:
  - revenue persistently falling short of budget projections;
  - revenue lagging regional peers in tax to Gross Domestic Product (GDP) ratios;
  - the Government’s assessment that an increase of revenue of 2.2 – 3.0 percent of GDP will be required to finance its additional spending needs over the next five years.
- The MTRS is proposed to be implemented over a five-year period and is a high-level road map for tax system reform to mobilize revenue for the government’s strategic objectives.
- A joint FAD–MOFE workshop in June 2019 initiated MTRS formulation, producing a first draft action plan and an MTRS gap analysis.

### Report purpose and revenue potential
- The report provides options to address high-risk areas of tax non-compliance and to strengthen revenue administration. Tax policy reform options are presented in a separate companion report.
- The report sets out short- and medium-term options targeting high-risk non-compliance and institutional capacity building in both the GDT and the GDC.
- If implemented in full, these options have the potential to raise around one percent of GDP in revenue over the MTRS period. Some early gains may be possible but building capacity and achieving sustainable revenue improvements involve longer lead times.

### Priority areas for compliance improvement (findings)
- Informality and tax evasion:
  - Underpayment of tax is pervasive across all sectors, with the largest losses in construction, trade, and services.
  - The Value Added Tax (VAT) compliance gap was estimated by the IMF to be 28 percent in 2015—almost twice the European Union (EU) average.
  - One in three workers were estimated by the World Bank to be engaged in some form of informal employment in 2018.
  - Rolling anti-informality campaigns have not achieved significant and sustainable improvement; a different, more strategic approach is required.
- Five priority areas identified with targeted revenue-increasing options:
  - reducing the VAT compliance gap (early focus on the construction sector),
  - reducing the cash economy, undeclared work, and underreporting,
  - taxing unexplained wealth (including leveraging automatic exchange of financial account information through a well-designed voluntary disclosure program),
  - limiting revenue leakage through artificial tax avoidance arrangements,
  - improving Customs administration by expanding information sharing arrangements and using data analytics to strengthen risk profiling processes.
- Measures are balanced with initiatives to reduce compliance costs, increase certainty in tax interpretation, and raise community confidence in the integrity of revenue administration.
- These measures should form part of wider compliance improvement strategies aligned with a compliance risk management approach.

### Institutional capacity of revenue administrations (findings and implications)
- Despite progress, institutional capacity of GDT and GDC remains relatively weak by international standards.
- It is unclear they could successfully implement the MTRS without significant upgrades in technical staff skills and supporting organizational arrangements.
- The report sets out options for reorganizing each agency to optimize performance, build stronger analytical and risk management capabilities, and develop a more competent workforce.
- Implementing a reform program at this scale while maintaining normal operations requires:
  - strong and sustained political support,
  - significant investment throughout the MTRS life,
  - the government to provide necessary human and financial resources, including a dedicated reform program resource and enabling laws and regulations.
- Stability in senior leadership of GDT and GDC throughout MTRS implementation is essential to maintain reform momentum.

### MTRS governance (findings and actions)
- Effective governance arrangements are essential. The report outlines:
  - appropriate management structures and support arrangements at MOFE and for each participating agency;
  - roles and responsibilities for key players in the governance process.
- The revenue administration options (and companion tax policy options) must now be considered for inclusion in Albania’s MTRS.
- It is critical that the Steering Committee completes the MTRS in accordance with the action plan at Appendix IX.
- The IMF stands ready to provide ongoing support and guidance with the next phase of work.

### Summary of options and recommendations (Box 1 highlights)
- The report provides a short-term (First 12 months) and medium-term (One – Four Years) matrix of options and recommendations across key sections:
  - Section III — Addressing high risk areas of non-compliance:
    - VAT gap: maximize fiscalization potential; target construction sector; consider reverse charge regime; implement focused CRM compliance projects; protections against VAT fraud including ‘joint and several’ VAT liability and reverse charge for selected goods.
    - Cash economy / undeclared work: develop holistic integrated approaches; improve inter-agency cooperation; extend persons required to file income tax declarations; strengthen criminal sanctions; improve analytics and data sharing; develop partnerships with business and community; improve quality of financial statements; develop government action plan to reduce cash economy.
    - Taxing unexplained wealth: target significant unexplained wealth; give auditors power to assess by indirect methods; begin automatic exchange of financial account information under the Common Reporting Standard (CRS) framework by 2020; incentivize clean-up of past offshore-related evasion through a voluntary disclosure program (VDP) in the run-up to 2020 automatic exchange; widen VDP to include undeclared domestic funds preceded by automatic reporting by financial institutions; ensure credible threat and follow-up investigations for VDP non-participants; collect taxes evaded through corruption by improving cooperation gateways between revenue agencies and enforcement bodies.
    - Reducing tax avoidance: ensure effective General Anti-Abuse Rule (GAAR); enact targeted anti-avoidance measures for prevalent artificial arrangements (‘bogus’ self-employment, artificial business splitting); establish a specialist anti-avoidance unit in GDT.
    - Reducing compliance costs / increasing certainty: develop taxpayer service strategy; improve interpretative guidance; improve tax product and process design with stakeholder interaction; ensure decision-making on individual tax outcomes resides with GDT; pay VAT refunds on time and ensure SOEs pay taxes; implement structured integrity assurance; engage taxpayers and intermediaries in designing laws, forms, procedures, and reporting systems.
  - Section V — Building institutional capacity (GDT):
    - shift fiscal monitoring to Audit directorate; channel telephone enquiries to national call center with escalation process; expand outbound telephone verification work; consolidate operational work into no more than three large regional offices plus Large Taxpayer Office (LTO) and national call center; convert remaining Regional Tax Offices (RTO) into service outlets and rationalize RTO network.
    - strengthen CRM capability: liaise with NAIS for Enterprise Data Warehouse; contract-in data analytics experts with skills transfer requirement; leadership to champion CRM; expand third-party data; acquire modern analytics software and train staff; partner with universities for courses in data analytics and behavioral science.
    - develop workforce competence: industry training for LTO staff; skills upgrades for call center staff in law interpretation and negotiation; acquire Computer Assisted Audit Tools and partner with other jurisdictions; authorize use of indirect audit methods and train auditors; recruit small cadre for intensive training in law interpretation and indirect audit methods with annual bonus and required annual statement of income and assets; seek assistance from Tax Academy, universities, other jurisdictions, and professional associations.
    - increase operational independence and leadership stability: ensure GDT leadership continuity for MTRS period; grant more autonomy in organization design, budget management, HRM, and performance standards.
  - Section V — Improving Customs Administration:
    - increase number of authorized economic operators; centralize risk profiling into one national center; improve risk filters to allow for >33 percent through the Green Channel; enact legal provisions for NCTS; increase collaboration against informality, smuggling, corruption and counterfeit goods; develop professional agile workforce; assign responsibility for all fuel related taxes to one agency; implement integrity framework; continue IT investment; implement NCTS system; roll-out Single Window; reduce number of special tax zones and entities; expand Green Channel further (>50 percent); develop supply chain monitoring for fuel; develop advanced risk profiling and analytics; expand information exchange domestically and internationally.
  - Section VI — MTRS governance arrangements:
    - establish MTRS Program Management Office; strengthen MTRS Steering Committee composition; establish a GDC Project Office; MTRS Steering Committee to approve MTRS draft by January 31, 2020; ensure attention to linkages and dependencies so critical reforms are prioritized and sequenced.

*Source: PREFACE and Executive Summary, 1albea2022003 - PREFACE*

### 2.      Despite the increases, revenues have persistently fallen short of budget forecasts.

### 2.      Despite the increases, revenues have persistently fallen short of budget forecasts.

### Revenue performance and shortfalls
- On average, over the last 10 years, tax revenues underperformed relative to forecasts by close to 1.5 percent of GDP.
- Collection shortfalls against budget have continued into recent years and have mainly been attributed to unrealistic forecasting.
- The trend continued into 2019 with a further decline versus forecast over the first nine months, particularly in VAT.
- The stock of approved unpaid VAT refunds was ALL18.1 billion as at end-September 2019―up from ALL16.8 billion at end-December 2018.
- VAT refunds for certain large taxpayers are paid by installments, contrary to international good practice.

### Revenue collected by tax type (2016–2018) — key figures (preserve source numeric presentation)
- Tax Type — 2016 Revenue / GDP Percent; 2017 Revenue / GDP Percent; 2018 Revenue / GDP Percent
  - Personal income tax: 31.4 2.1; 32.1 2.1; 36.5 2.2
  - Social contributions: 79.2 5.4; 86.8 5.6; 93.2 5.7
  - Profit tax: 28.5 1.9; 31.6 2.0; 34.5 2.1
  - VAT: 128.1 8.7; 139.5 9.0; 143.5 8.8
  - Excises: 41.9 2.8; 45.1 2.9; 45.0 2.8
  - Customs duties: 6.1 0.4; 6.5 0.4; 6.2 0.4
  - Other taxes: 35.8 2.4; 38.5 2.5; 38.6 2.4
  - Local govt. revenue: 15.0 1.0; 18.4 1.2; 21.9 1.3
  - Total: 366.0 24.9; 398.6 25.7; 419.3 25.8
- Note: VAT revenues are overstated as they do not reflect VAT refund arrears, which amounted to ALL16.8 billion at end-2018.
- Source: MOFE and IMF staff calculations and estimates.

### GDT and GDC revenue collected (2017–2018) — (ALL billions)
- GDT collected (2017 / 2018 / Difference):
  - PIT: 32.1 / 36.5 / +4.4
  - Social security contributions: 82.8 / 88.7 / +5.9
  - VAT gross: 48.9 / 50.9 / +2.0
  - VAT refunds: (13.9) / (14.4) / (+0.5)
  - VAT net: 35.0 / 36.5 / +1.5
  - Profit Tax: 31.6 / 34.5 / +2.9
  - National Taxes: 12.4 / 12.9 / +0.5
  - Circulation and Fuel Taxes: 15.2 / 18.3 / +3.1
  - Gambling Taxes: 5.3 / 4.6 / -0.7
  - Administrative fines: 0.2 / 0.1 / ------
  - GDT total: 214.7 / 232.1 / +17.4
- GDC collected (2017 / 2018 / Difference):
  - VAT - Imports: 104.6 / 107.2 / +2.6
  - Excise - Imports: 38.5 / 42.7 / +4.2
  - Excise - Domestic: 7.2 / 3.9 / -3.3
  - National Taxes: 16.5 / 19.5 / +3.0
  - Customs Duties: 6.5 / 6.2 / -0.3
  - Rent Tax: 2.3 / 2.6 / +0.3
  - Scanning Fee: 1.1 / 1.1 / -----
  - GDC total: 176.7 / 183.2 / +6.5
- GDT and GDC Total: 391.4 / 415.3 / +23.9
- Source: GDT and GDC

### MTRS context, objectives, and expected revenue impact
- Albania is formulating an MTRS with IMF support to strengthen and modernize revenue mobilization through policy and administrative reform, simplify procedures, and create fiscal space for investments in sustainable development goals, including health, education, and infrastructure.
- The MTRS is a high-level road map, typically implemented over a four to six-year period, to mobilize revenue through the tax system to finance spending needs over the medium-term.
- The government has assessed additional spending needs for the next five-year period and estimated that an increase of tax to GDP of 2.2-3.0 percent is required.
- The government plans to finance this gap with revenues from comprehensive tax policy and administrative reforms.
- An MTRS gap analysis was completed in June 2019; follow-up capacity development for tax policy and revenue administration would be provided by the IMF.
- If the revenue administration reform options in this report are accepted in full, they have the potential to raise around one percent GDP over the MTRS period.
- Strong governance and reform program management arrangements are essential; alignment and consistent approaches in the next generation GDT and GDC reform plans are to be developed over the next 12 months.

### Recent tax policy changes and effects on base and administration
- Recent tax policy reforms have narrowed the tax base and complicated tax administration through tax cuts and sector-specific incentives (e.g., a low VAT rate for accommodation and special concessions for 4/5-star hotels and pharmaceutical manufacturers).
- 2019 measures:
  - Corporate Income Tax (CIT) rate reduced from 15 to 5 percent for some 11,000 businesses.
  - Dividend tax reduced from 15 to 8 percent.
  - Lower brackets for Personal Income Tax (PIT) were widened significantly.
- 2018 measure: a VAT threshold reduction brought some 13,000 micro-businesses into the VAT system with little revenue impact.
- Headline items for the proposed 2020 fiscal package include increased deductions for sports sponsorship, legislative support for payment of VAT refunds by instalments in certain circumstances, and a profit tax incentive for the automotive industry.
- Tax policy reform options report conclusion: the current tax system is complex and fragmented; frequent ad hoc changes undermine stability and transparency and contribute to significant challenges for tax administration; a fairer, more efficient, simpler, and more transparent tax system could invigorate domestic economic activity and attract more foreign investment.

### Revenue administration setting and reform needs
- GDT progress:
  - Steady modernization since a new IT system in 2015 and a reform agenda, but reform momentum recently slowed partly due to lack of leadership stability.
  - Current reform program has been in place for almost three years and needs refreshing.
- GDC progress:
  - Good progress in modernizing administration to meet EU standards; customs code broadly aligned with EU rules and procedures.
  - Improvements in online customs procedures, reduced processing times, increased use of risk assessment.
  - A work plan to upgrade Customs IT systems has been developed; reform program documented in GDC’s Business Strategy 2017-2021.
- Significant improvements still required in GDT’s and GDC’s operations and structures; considerable investment and support needed to fully modernize administrations and achieve material tax gap reductions.

### Compliance challenge — indicators and impacts
- Informality and tax gap indicators:
  - High VAT compliance gap: estimated by the IMF to be 28 percent in 2015—almost twice the EU average; largest losses in construction, trade, and services.
  - Informal work and underreporting: One in three economically active Albanians estimated by the World Bank Group to be working in some form of informal employment in 2018—compared to one in five in Serbia and North Macedonia.
  - Large cash economy: Cash held outside of the banking system in August 2019 was ALL288 billion or 22 percent of all circulating money—more than the annual amount of taxes collected by the GDT—and was trending upwards. Equivalent estimates for North Macedonia and Serbia are 7.4 percent and 6.8 percent respectively.
- Consequences:
  - Informality undermines tax revenues, social cohesion, economic growth, and fairness perceptions, fueling a culture of non-compliance.
  - Tax design complexity and high compliance costs contribute to low “tax morale”; frequent policy changes introduced horizontal unfairness and opened opportunities for artificial tax avoidance (e.g., bogus self-employment, splitting businesses, tax rate arbitrage).
  - Albania scores relatively poorly in international “Paying Taxes” rankings, including hours needed to comply and VAT refund arrangements.

### Current responses to non-compliance
- Rolling “fight informality” campaigns since September 2015:
  - Multi-agency, high-profile spot check monitoring inspections; recently better targeted and coordinated through an inter-agency operational committee chaired by the MOFE.
  - Campaigns are not linked to a clear overarching strategy; level of violations discovered remains high, implying limited sustainable impact.
- Fiscalization (real-time monitoring of invoices and receipts):
  - Introduction over the next two years: first B2C online retail receipt monitoring element to be in place by April 2020; B2B mandatory e-invoicing to follow in mid-2021.
  - IMF note: good practice would phase B2B first, then B2C.
  - GDT estimates that fiscalization has the potential to increase VAT collection by between 10 and 15 percent when fully implemented.
- Major efforts to improve revenue administration effectiveness have been made, but many areas still require institutional capacity improvements.

### Priority actions for compliance improvement (Box 3)
- 1. Reduce the VAT compliance gap.
- 2. Reduce the cash economy, undeclared work, and underreporting.
- 3. Tax unexplained wealth.
- 4. Limit artificial tax avoidance.
- 5. Reduce compliance costs, increase tax certainty, and confidence in revenue administration.

### Reducing the VAT compliance gap — recommendations and sector focus
- Maximize revenue-raising potential of fiscalization by ensuring structures and systems are in place for monitoring and follow-up enforcement:
  - Fiscalization is not a standalone solution; it can deliver permanent revenue increases only if part of a wider compliance improvement strategy, including simplification and compliance cost reduction.
  - Monitoring and follow-up enforcement must be risk driven; develop risk filtering systems to reduce large volumes of data to manageable levels and limit follow-up field audits to highest risk cases; office-based interventions appropriate in many cases.
  - Fiscalization is an opportunity to cultivate greater trust in the tax system by emphasizing benefits to business (faster VAT refund clearance, lower long-run compliance costs under e-invoicing, and a fairer tax system).
- Target the construction sector early and consider introducing a ‘reverse charge’ regime to prevent tax losses in the sub-contractor supply chain:
  - Construction is particularly problematic for VAT fraud along sub-contractor chains.
  - Domestic reverse charge regimes for construction are used extensively in the EU and worldwide; they make the recipient (usually the main contractor) responsible for paying the VAT, protecting against disappearing sub-contractors.
  - GDT should prioritize an intensive compliance improvement program specifically for the construction sector within the MTRS.
- For other high-risk sectors, develop and implement focused compliance improvement projects using modern Compliance Risk Management (CRM) techniques:
  - Projects may need capacity development assistance for data analytics and project design.
  - Sectoral projects must be comprehensive rather than limited audits or ad hoc responses.

*Source: IMF staff report content provided in the supplied PDF excerpt.*

### 26.      Put in place additional protections against VAT fraud, including ‘joint and several’

### 26.      Put in place additional protections against VAT fraud, including ‘joint and several’

### VAT fraud protections and mechanisms
- Introduce a ‘joint and several’ liability mechanism—where a person other than the person responsible for the VAT payment can be held liable if he “knew or should have known” that the VAT liability would go unpaid.
- Frame introduction of joint and several VAT liability in line with established EU law principles to preserve legal certainty for genuinely innocent parties.
- Where product-specific VAT fraud risks are indicated (example: raw metals, with chromium featured in a recent significant domestic Albanian VAT fraud), consider the VAT reverse charge mechanism for that product.

### MTRS Options for Reducing the VAT Compliance Gap
Short Term (First 12 months)
- Maximize the revenue-raising potential of fiscalization by ensuring that appropriate structures and systems are in place for monitoring and follow-up enforcement.
- Target the construction sector for early attention and consider introducing a ‘reverse charge’ regime to prevent tax losses in the sub-contractor supply chain.

Medium Term (One - Four Years)
- Develop and implement a series of focused compliance improvement projects using modern CRM techniques for other identified high-risk sectors, such as professionals.
- Put in place additional protections against VAT fraud, including ‘joint and several’ VAT liability, and reverse charge arrangements for selected goods susceptible to fraud.

### Reducing the cash economy, undeclared work, and underreporting — key findings
- Responsibility for tackling undeclared work is spread across several agencies: tax non-compliance with the GDT and GDC, SSC violations with social insurance bodies, and labor law with the labor inspectorate.
- There is a need for more organized operational planning based on a clear overarching strategy despite better interagency coordination at operational level.
- Compliance behavior is affected by both the level of sanctions and the likelihood of detection; existing proposals include increasing proportionality of administrative fines and escalating sanctions for repeat offences.
- Large mismatch exists between labor force statistics and numbers of registered workers; the GDT needs better analytics and systematic third-party data matching.
- Exceptionally large “bunching” of declared income at, or below, the minimum wage requires investigation using analytical techniques.
- Current general requirement to file a tax declaration is limited to persons with annual income over ALL2 million; consider extending filing requirement to include all those with more than one source of income (apart from employment income) even if less than ALL2 million in aggregate.
- Underreporting on financial statements facilitates tax underreporting; review law establishing IEKA and company law reporting requirements to ensure tax compliance obligations are adequately reported in audited financial statements.
- An exceptionally high level of cash circulating outside the banking system is cited as 22 percent of all money in circulation.

### Measures to reduce cash economy (selected initiatives)
- Reduce the cost of bank account facilities for individuals and small businesses and encourage greater use of electronic payment facilities. Current usage statistics: less than half of Albanian adults have a bank account and only around 200,000 have e-money accounts.
- Examine further prohibitions on cash dealings; consider compulsory bank transfer payments for significant outgoings such as rent (below the current ALL150,000 cash prohibition threshold); examine international cases mandating card payments and POS terminals for professional groups and high value traders.
- Develop information and awareness campaigns to coincide with fiscalization, encouraging taxpayers to avoid cash operators and publicize confidential reporting channels.
- Partner with reputable business, trade and professional associations to highlight risks of dealing with cash operators.
- Educate established business operators about non-tax risks of understating income: reduced insurance pay-outs, limited access to credit, compromised ability to sell a business.
- Engage the community in identifying and rejecting cash modes and inform the community of increasing detection capabilities.
- Widely publicize anti-evasion actions and sanitized case studies where publication of detailed taxpayer information is restricted.

### MTRS Options for Reducing Cash Economy, Undeclared Work, and Underreporting
Short Term (First 12 months)
- Develop a more holistic and integrated approach towards tackling undeclared work.
- Improve inter-agency cooperation arrangements and ensure operational plans to identify shadow work are grounded on a clear strategy.
- Extend the categories of persons required to file an income tax declaration.
- Strengthen criminal sanctions for offences relating to undeclared work and underreporting.
- Improve analytics and data sharing to better target unregistered work and underreporting.

Medium Term (One - Four Years)
- Develop closer partnerships with business and community representatives to tackle undeclared work and tax-driven unfair competition.
- Improve the quality and reliability of financial statements.
- Develop an action plan at government and revenue administration level to reduce the cash economy.

### Taxing unexplained wealth — key measures and timelines
- Give auditors explicit power to assess tax liability by indirect audit methods; change tax procedure law to explicitly allow indirect audit methods and provide that reasonable assessments based on such methods are valid unless the taxpayer can explain sources of wealth.
- Specifically target offshore-related tax evasion and begin automatic exchange of financial account information under the Common Reporting Standard (CRS) framework by 2020.
- Incentivize the clean-up of past offshore-related evasion through a voluntary disclosure program (VDP) in the run-up to the first (2020) automatic exchange.
- Widen the VDP to include undeclared domestic funds and assets—preceded by requiring automatic reporting by financial institutions of account information of Albanian residents; introduce automatic reporting to GDT of financial account information of Albanian tax residents—preferably using the CRS reporting framework—in tandem with automatic cross-border reporting.
- Ensure a credible threat that VDP non-participants will be effectively and firmly dealt with; highlight establishment of a follow-up investigation task force.
- Collect taxes evaded through corruption and other financial crimes by improving cooperation “gateways” between revenue agencies and other enforcement bodies (the prosecutor, the police, the financial intelligence unit and the anti-corruption authorities).

Additional facts and references in the source text:
- OECD press release note: voluntary disclosure of offshore assets resulted in more than €95 billion in additional revenue for OECD and G20 countries over the 2009 – 2019 period.
- Current criminal fine cited: ALL10,000 or one year in prison.
- The CRS is defined as the standardized framework developed by the OECD for automatic exchange of financial account information.

### MTRS Options for Taxing Unexplained Wealth
Short Term (First 12 months)
- Target cases of significant unexplained wealth and give auditors explicit power to assess tax liability by indirect methods.
- Target, specifically, offshore-related tax evasion and begin automatic exchange of financial account information under the Common Reporting Standard (CRS) framework by 2020.
- Incentivize the clean-up of past offshore-related evasion through a voluntary disclosure program (VDP) in the run-up to the first (2020) automatic exchange.
- Widen the VDP to include undeclared domestic funds and assets—preceded by requiring automatic reporting by financial institutions of account information of Albanian residents.
- Ensure a credible threat that VDP non-participants will be effectively and firmly dealt with; highlight the establishment of a follow-up investigation task force.

Medium Term (One - Four Years)
- Collect taxes evaded through corruption and other financial crimes by improving cooperation “gateways” between the revenue agencies and other enforcement bodies.

### Reducing artificial tax avoidance — key measures
- Ensure the 2019 general anti-abuse rule (GAAR) is effective and acts as a real deterrent; provide clearer guidance (by-laws or otherwise) to the business community, GDT staff, and the courts on GAAR operation.
- Pending simplification of the tax system, enact targeted anti-avoidance measures to combat pervasive artificial arrangements such as ‘bogus’ self-employment and artificial business splitting.
- For bogus self-employment: consider defining “litmus tests” of employment status in tax law (e.g., supervision, direction and control), disregard legal form in the case of a personal services company, and place the burden of proof on the “client” that the contractor is a genuine freelancer.
- For artificial business splitting to stay in a low tax bracket: allow only one threshold (example cited: ALL8 million) for all related businesses, with a very wide definition of related parties and entities, and apportion a single threshold between related businesses, usually on the basis of turnover.

*Source: IMF staff content from the provided chapter text.*

### 43.      Establish a specialist anti-avoidance unit in the GDT. Tax avoidance can be highly

### 1albea2022003 - 43.      Establish a specialist anti-avoidance unit in the GDT. Tax avoidance can be highly

### Specialist anti-avoidance unit: rationale and current state
- Tax avoidance "can be highly complex and difficult to identify."  
- An effective response requires "a center of expertise in the tax administration—to deal directly with the largest cases and to provide guidance and support to auditors on avoidance-related issues."  
- The need for centralization is reinforced by the recent introduction of a GAAR and Albania’s commitments as part of the Base Erosion Profit Shifting (BEPS) inclusive framework (which it joined in August 2019).  
- Currently, the only specialist anti-avoidance unit is the transfer pricing area located in the LTO. The GDT "needs to have a center of expertise for a much wider range of avoidance issues than transfer pricing."  
- In many countries the specialist anti-avoidance unit is in the LTO.

### MTRS options for reducing tax avoidance — Short Term (First 12 months)
- Ensure that the general anti-abuse rule (GAAR) can be effectively implemented and act as a real deterrent to artificial tax-driven arrangements.  
- Pending simplification of the tax system, enact targeted anti-avoidance measures to combat the most pervasive artificial arrangements—‘bogus’ self-employment and artificial business splitting.  
- Establish a specialist anti-avoidance unit in the GDT.

### Reduce compliance costs and increase tax certainty and confidence — Introduction & key weaknesses
- Some progress has been made, but "major weaknesses remain."  
- The GDT recognizes the need for balance between service and enforcement. Around 160 staff are now deployed to taxpayer service functions across headquarters, the regional tax offices (RTO), and a national call center.  
- Taxpayer compliance costs remain higher than in most countries in the region. Major weaknesses include:  
  - There is no overarching taxpayer service strategy.  
  - Interpretive advice provided to taxpayers and intermediaries is inadequate.  
  - VAT refunds are not paid on time and some state-owned enterprises (SOE) do not meet their tax obligation, which undermines confidence in the tax system.  
  - The GDT is not responsible for resolving the first stage of administrative appeals—a core tax administration function.  
  - The integrity assurance framework is inadequate.

### Areas in need of improvement — findings and recommended actions
- Develop an overarching taxpayer services strategy that outlines the vision and channel strategy for medium-term service delivery.  
- Make tax laws and regulations "as simple and easy to understand as practical." Government authorities should involve businesses in the formulation of regulations and reporting systems.  
- Improve interpretative guidance: the GDT publishes a half-yearly technical bulletin, but scope and content fall short of good international practice. The GDT should publish regular practice statements and technical bulletins on new laws, amendments, and ambiguous areas. Tailor information products to user needs (e.g., simple explanatory material for micro businesses).  
- Improve tax product and process design through regular and meaningful interaction with users, including establishing a regular liaison forum with accountancy and other professional bodies.  
- Ensure all decision-making related to tax outcomes for individual taxpayers resides with the GDT; currently the MOFE takes roles that should belong to the GDT (interpretation in complex cases, first-stage administrative disputes, approvals for debt write-offs and extra-statutory arrangements). The responsibility for resolving administrative appeals "should rest with the GDT."  
- Promote confidence by paying VAT refunds on time and ensuring all SOEs pay their taxes. As at end-2018 the stock of approved but unpaid VAT refunds had reached ALL16.8 billion—and was growing—and around ALL8.2 billion in unpaid taxes was owned by two state owned power companies.  
- Strengthen enforcement against deliberate non-compliance: tax unexplained wealth, pursue stronger collection actions including property seizures, corporate liquidations, and personal bankruptcies.  
- Put in place a more structured integrity assurance framework: define, communicate and promote standards of behavior; monitor and enforce; correct lapses; evaluate and report on outcomes.

### Box 4 — Typical elements of a taxpayer services strategy (selected)
- Treating taxpayers as clients with rights codified (e.g., taxpayer charter) and publicized.  
- Consulting widely with taxpayers and/or their representatives prior to implementing changes in laws, regulations, forms, procedures, and reporting systems.  
- Working cooperatively with other government authorities to provide coordinated services.  
- Tailoring service delivery to match needs of taxpayer segments and risk to revenue, and using effective delivery tools including social media.  
- Ensuring services staff are highly qualified and able to match expectations of taxpayers and their professional advisors.  
- Providing services independent of time and place with electronic services (interactive telephones, e-services and web pages).  
- Providing a dedicated enquiry service for tax professionals.  
- Promoting self-help web and e-services and minimizing face-to-face interactions.  
- Providing prefilled tax returns.  
- Establishing and monitoring service delivery performance against standards; measuring client satisfaction; publicizing performance levels.

### MTRS options for reducing compliance costs and increasing certainty — Timelines and actions
Short-term (First 12 months)
- Develop a taxpayer service strategy.  
- Improve interpretative guidance to taxpayers and their advisors.  
- Improve tax product and process design through regular and meaningful interaction with users of GDT services, including key intermediaries.  
- Ensure that all decision-making related to tax outcomes for individual taxpayers resides with the GDT.  
- Promote confidence by paying VAT refunds on time and ensuring that all SOEs pay their taxes.  
- Put in place a more structured integrity assurance framework.

Medium-term (One - Four Years)
- Engage and involve taxpayers and tax intermediaries in designing tax laws and regulations, forms, procedures, and reporting systems with a view to simplifying the tax system and reducing compliance costs.

### Building institutional capacity — summary observations and capacities needed
- The GDT has implemented several modernizations: a modern IT system; universal e-filing; streamlined headquarters; a dedicated Large Taxpayer Office (LTO); a national call center; initial CRM development; refresh of industry codes and taxpayer data; Fiscalization project to provide real-time data on cash sales (April 2020) and e-invoices (July 2021).  
- Despite initiatives, overall capacity remains "relatively weak by international standards": outdated business model, limited access to third-party data, no enterprise data warehouse, insufficiently skilled staff, lack of modern administration support tools, and insufficient operational independence and leadership flexibility.  
- Sustainable capacity building requires substantial financial and technical assistance over the medium term.

### Reorganize to optimize performance — key findings and proposals
- The current organization reflects an outdated face-to-face business model. The GDT has a function-based headquarters; operational work is delivered through 13 RTOs, an LTO and a national call center; a workforce of around 1,000 staff is deployed across the 13 RTOs.  
- Dispersal across multiple sites creates inefficiencies, high management overheads, fragmented functions, reduced specialization, and constrained redeployment flexibility.  
- Consolidating operations into a small number of large RTOs would deliver major productivity improvements; remaining small RTOs could be retained as service centers with reduced staffing and later rationalized.  
- The current structure does not take full advantage of the new IT system. Telephone enquiries are answered by taxpayer service units and desk audit units in RTOs or by the national call center with no coordination or escalation process. Recommendation: automatically direct all telephone enquiries to the national call center.  
- Much enforcement now done by RTO desk audit units could be more efficient via enhanced system edit checks, automated risk filters, and centralizing outbound telephone verification in the national call center.  
- The split of fiscal monitoring responsibilities between Audit and Investigations is inappropriate; both conduct short visits to business premises with similar checks, but Investigations visits are unannounced and can only impose administrative fines, with Audit responsible for follow-up assessments. Cooperation between the directorates is deficient.

### Box 5 — GDT checks during fiscal verification visits
- The taxpayer is properly registered for tax and social security purposes.  
- Cash sales are recorded using a fiscal register.  
- Receipts for cash sales are issued to customers.  
- Receipts are held for all inventory.  
- A price list is displayed on the premises.  
- All employees are in the system for both tax and social security.

*Source: IMF staff report content provided in the supplied PDF excerpt.*

### 62.      Full responsibility for the fiscal monitoring work  should be shifted to the Audit

### Full responsibility for the fiscal monitoring work should be shifted to the Audit directorate

### Shift responsibility for fiscal monitoring to Audit
- Recommendation: Shift responsibility for all fiscal monitoring work to the Audit directorate to coordinate basic audit procedures and consolidate fiscal verification activities under Audit management.
- Expected benefits:
  - More effective coordination of basic audit procedures.
  - Facilitates planning and implementation of a comprehensive enforcement strategy to support the Fiscalization project due to “go live” in April 2020.
  - Allows the Investigations directorate to focus on genuine cases of serious evasion and fraud.
- Short-term (First 12 months) options:
  - Shift responsibility for all fiscal monitoring work to the Audit directorate.
  - Channel all telephone enquiries to the national call center in the first instance and develop a structured escalation process to deal with more complex enquiries in a timely manner.
  - Expand scope and volume of outbound telephone verification work conducted by the national call center (e.g., filing and payment enforcement, basic audit checks, and VAT refund verification checks).
- Operational note: A pilot project conducted by the call center this year involving outbound calls to taxpayers who filed but did not pay appears to have been highly successful.
- Medium-term (One - Four Years) options:
  - Consolidate the operational work of the GDT into no more than three large regional offices plus the LTO and the national call center.
  - Convert the remaining RTOs into service outlets—and rationalize the RTO network further over time.

### Build a Stronger CRM Capability
- Status and findings:
  - The GDT has adopted the CRM model endorsed by the IMF, EU and OECD.
  - International experience indicates CRM can deliver sustainable increases in tax revenue through improved taxpayer compliance.
  - Progress is slow: only two CRM projects have been commenced (targeting tourism, and restaurants and cafes) and these have been largely driven by IMF capacity development technical assistance.
  - The GDT’s compliance effort remains predominantly enforcement based and focused on detection and punishment, which is cost-inefficient and does little to improve future compliance behavior or raise revenue collections.
- CRM approach (Box 6) key principles:
  - Recognizes complexity of compliance drivers; one-dimensional responses are unlikely to be successful.
  - Focus on understanding factors shaping taxpayer behavior to develop effective responses.
  - Promote integrated treatment strategies using an optimal mix of responses (e.g., clarification of the law, simplified procedures, education, assistance, audit, enforcement, publicity).
  - Sequence responses coherently to deliver maximum compliance leverage.
- Main constraints to CRM development:
  - Insufficient institutional support—priority has not been given to CRM implementation.
  - Insufficient access to third-party data from government and private sector sources.
  - Lack of an enterprise data warehouse (EDW) to centralize internal and external data for analysis and use across the organization.
  - Lack of a data analytics capability and absence of any data analysts within GDT.
- Data access and EDW opportunities:
  - GDT should be more pro-active in obtaining third-party data; NAIS-managed government-wide interactive platform may offer a wider range of relevant data than currently accessed.
  - Pursue domestic third-party suppliers not available through NAIS (e.g., utilities companies).
  - Seek government support to access a much broader range of domestic bank account data—ideally as a parallel initiative to the upcoming exchange of off-shore bank account data (see Section III).
  - The multi-lateral exchange of information instrument soon to be ratified will open opportunities to acquire overseas third-party data (e.g., data on sales by internet-based businesses such as vendors of short-term accommodation in Albania).
  - The Fiscalization project is an ideal opportunity to establish an EDW: the IT system under development by NAIS will capture cash register data and e-invoice data and store this data together with e-taxes data in an integrated facility.
  - NAIS is responsible for developing and maintaining the EDW infrastructure; GDT must decide what data is captured, and how it is stored, analyzed, retrieved and reported.
- Analytical capacity and skills gap:
  - The GDT currently does not have any data analysts; skilled data analysts are scarce and the GDT is unlikely to recruit full-time experts.
  - Albanian universities do not currently offer courses in data analysis or behavioral science.
  - Options to address shortfall:
    - Partner with universities to establish tertiary courses in data analytics and behavioral science; offer practical work experience and future employment opportunities as incentives.
    - Acquire modern analytics software and secure training either from the supplier or through partnerships with other advanced tax administrations.
    - Secure services of analytics experts on a short-term or part-time basis to lead staff and include skills transfer as a contractual condition.
- Leadership and implementation:
  - New senior leadership must champion CRM development across the organization; regular reinforcement from senior leadership is critical.
  - Increase the number of CRM projects undertaken over time.
- MTRS Options for Strengthening CRM Capability:
  - Short-term (First 12 months):
    - Liaise with NAIS to ensure that an EDW is delivered as part of the Fiscalization IT system.
    - Contract-in experts in data analytics to undertake specific data analysis projects and include a requirement for transfer of skills to GDT staff.
    - Leadership to champion the CRM approach and increase the number of CRM projects over time.
  - Medium-term (One - Four Years):
    - Seek to expand the third-party data available to the GDT.
    - Acquire modern analytics software and train GDT staff in its use.
    - Partner with universities to develop courses in data analytics and behavioral science.

### Developing a Competent and Well-Equipped Workforce
- Assessment of workforce skills and equipment:
  - The standard of technical skills and level of industry knowledge across the GDT workforce are low.
  - Lack of technical expertise reduces productivity and hampers delivery of assistance essential to taxpayers and intermediaries.
  - Key skills gaps affect audit, taxpayer service, and arrears management.
- Specific functional shortcomings:
  - Auditors:
    - Focus almost exclusively on reconciling accounting records to tax returns (direct audits).
    - Not trained in indirect audit methods and have little capacity to establish unrecorded economic activity or ascertain potential liability from unexplained wealth.
  - Taxpayer service:
    - Advice is largely limited to procedural advice; telephone and face-to-face enquiries on law interpretation are often answered by restating law provisions or general MOFE rulings.
    - This problem affects the LTO; taxpayer representatives indicated this is a major irritant.
  - Arrears collection:
    - Staff are not skilled in hard enforcement measures (e.g., bankruptcy and liquidation action).
- Current training approach and deficiencies:
  - Training and development managed by HRM directorate.
  - New recruits receive two weeks of induction training delivered jointly by the Government School of Administration and the Tax Academy.
  - Existing staff changing roles are meant to receive two days training, but this rarely occurs in practice.
  - General annual training program exists but is almost exclusively prepared and delivered by more experienced GDT staff or by staff from the Prosecutor’s office for fraud-related law topics.
  - No testing or accreditation regime and no capacity for more advanced training in competencies not currently present in GDT.
  - Tax Academy: established in 2009 as a dedicated training center for the GDT and GDC; it has only eight staff and inadequate accommodation.
- Planned Tax Academy expansion:
  - Draft law to transform the training center into a genuine tax academy.
  - Plan to provide intensive training: new staff 12 months combined formal and on-the-job training; existing staff moving to new roles 3 months combined formal and on-the-job training.
  - Head of the Tax Academy estimates redevelopment will have a lead time of one to two years from the date of effect of the law.
  - OECD agreed to share all of its on-line tax learning modules; these will need translation and training supervisors recruited and trained, involving substantial lead-time.
- Tools and equipment gaps:
  - CAAT (Computer assisted audit verification tools) absent—these provide data queries, data stratification, sample extraction, statistical analysis, and documentation of tests performed.
  - Decision support software absent—rules-based decision-tree tools to assist staff and taxpayers in applying complex law (example cited: Australian Taxation Office employee-or-contractor decision support system).
- MTRS Options for Developing a Competent and Well-Equipped Workforce:
  - Short-term (First 12 months):
    - Liaise with representative bodies in key industries to provide training for LTO staff on industry structure and operations.
    - Target national call center staff for early skills upgrades in law interpretation and negotiation techniques.
    - Acquire suitable CAAT products and partner with other tax jurisdictions that use these products to train auditors.
    - Ensure law authorizes use of indirect audit methods and partner with other tax agencies for training in these approaches.
    - Recruit/select a small cadre of technical staff for intensive training in law interpretation and indirect audit methods; pay this group an annual bonus and require an annual statement of income and assets similar to that required from senior GDT staff; focus this group on highest priority projects (e.g., off-shore bank accounts and construction).
  - Medium-term (One - Four Years):
    - Seek assistance, in partnership with the Tax Academy, from universities, other tax jurisdictions, and professional associations to develop programs to address the skills gaps.

### Increase Operational Independence and Stability of Leadership
- Current limitations:
  - GDT lacks authority to make some key operational decisions; organizational changes must be approved at government level.
  - Budget is tightly controlled by MOFE.
  - Limited ability to redeploy staff across sites due to restrictive civil service-wide HRM framework.
  - Result: insufficient operational independence and flexibility to drive modernization and respond quickly to priorities and emerging risks.
- International context:
  - Many countries have increased revenue agency autonomy to improve performance while maintaining accountability and transparency.
  - Key autonomy areas commonly targeted:
    - Organization design and planning: authority to design/modify organization structure, office size/location, directorates, and management structure; authority to formulate and implement strategic and operational plans.
    - Budget management: discretion to allocate/reallocate budgeted funds across administrative functions to meet changed priorities and emerging risks.
    - Human resource management: authority to set academic and technical qualification standards; recruit and dismiss staff; establish and operate training/development programs; deploy staff across functions and sites; negotiate staff remuneration levels (often aligned with civil service-wide policies).
    - Performance standards: discretion to set its own administrative performance standards (e.g., for taxpayer service delivery).
- Leadership stability issues:
  - Instability in senior leadership has been a major impediment to reform: three changes of Director-General in the past year.
  - New leadership team: a new Director-General, two new Deputy Directors-General, and several new Director-level staff.
  - Recommendation: Ensure GDT leadership continuity for the period of the MTRS.
- MTRS Options to increase independence and stability:
  - Short-term (First 12 months):
    - Ensure GDT leadership continuity for the period of the MTRS.
  - Medium-term (One - Four Years):
    - Give more autonomy to the GDT in organization design, budget management, HRM, and setting performance standards.

*Source: IMF mission report content (excerpts provided).*

### 80.      The GDC has made steady reform  progress. The GDC collects around 43 percent of all

### 1albea2022003 - 80.      The GDC has made steady reform  progress. The GDC collects around 43 percent of all

### Reform progress and current operations
- The GDC collects around 43 percent of all taxes and duties.
- The Albanian customs code is aligned with the EU Customs Code.
- IT and automation:
  - Uses Automated System of Customs Data (ASYCUDA), including a module that categorizes imports by risk level.
  - Supported by online systems and automatic data processing.
- Trade facilitation:
  - OECD Trade Facilitation Indicators note that Albania matches or exceeds best performance of its comparators for trade facilitation.
  - Room for improvement: increase number of Authorized Economic Operators; introduce the New Single Window and the New Computerized Transit System (NCTS).
- Operational challenges:
  - Tackling tax evasion and smuggling.
  - Risk management.
  - Control of over 400 bonded inward processers.
  - Monitoring an excise relief scheme for fishing vessels.

### Building institutional capacity (paragraphs 81–85)
- Centralize risk profiling:
  - Current situation: risk profiling is carried out across the organization with local profiling at customs or excise stations.
  - Recommendation: centralize risk profiling into one national center to build expertise, improve focus on high-risk analysis, ensure consistency, and reduce costs for compliant businesses.
  - Recent centralization: valuation function has been centralized.
- Enhance data analytical capacity:
  - Current focus: monitoring revenue forecasts and risk profiling based on GDC data.
  - Gaps: no regular analysis of the excise gap or national market for individual excisable products (e.g., cigarettes); limited access to data from other agencies and third parties; no data warehouse facility.
  - Benefit: data analytics and enhanced risk-based management will provide better insights and widen use of intelligence sources.
- IT investment needs:
  - GDC has a comprehensive IT work plan.
  - Needs: updated version of ASYCUDA; integrated tariff management system; improved capacity to exchange and analyze data; introduction of a modern case management system.
- Workforce development:
  - Need a professional and agile workforce with skills in data analytics, mathematics, economics, and sectoral knowledge, plus leadership, collaboration, and interpersonal skills.
  - Requires investment in internal staff development and collaboration with the MOFE Tax Academy, educational institutions, businesses, and international partners.
- Integrity framework:
  - GDC should develop and fully implement an integrity framework building on core values, ethics, and Anti-Corruption and Professional Standards Directorate.
  - Framework should: define/communicate/promote standards; monitor/enforce and correct lapses; evaluate and report.

### Performance improvement strategies (paragraphs 86–95)
- Authorized Economic Operator (AEO) program:
  - New AEO program based on Customs-to-Business partnership (World Customs Organization).
  - Status: only two authorized exporters and one authorized importer/exporter approved to date.
  - Recommendation: increase number of authorized economic operators to reduce administrative burden.
- National Single Window:
  - Should be progressed to centralize import/export clearance and border control processes, fostering economic integration and reducing cost/time.
  - Supported by the World Bank’s Western Balkans Trade and Transport Facilitation Project.
  - Scheduled for implementation by November 2023.
- New Computerized Transit System (NCTS):
  - System of electronic declaration/processing for Union Transit and TIR declarations; used by EU member states and signatories of the Common Transit Convention.
  - Will enhance trade facilitation and reduce costs of doing business in Albania.
  - Supported by World Bank project and scheduled for implementation by June 2022.
- Risk channeling and inspections:
  - Current risk selection yields high numbers of “red” and “yellow” channel inspections, leading to unnecessary inspections and additional work.
  - Recommendation: adjust risk filters to increase percentage of green-channeled Single Administrative Documents.
- Circulation tax and fuel excise administration:
  - Current split: circulation taxes on fuel collected by GDC at importation on an agency basis for the GDT; circulation tax on internally produced fuel administered by GDT.
  - Recommendation: align responsibility for the entire fuel supply chain with one agency to reduce contacts, enable monitoring of entire supply chain, and manage compliance risks.
  - Note: significant reduction in circulation taxes collected by GDC in 2017 (see Table 4).
- Supply chain reporting for hydrocarbon fuels:
  - GDC procured track-and-trace fiscal stamp system for tobacco and alcohol (SICPA) and fuel marking system (GFI Albania).
  - Gap: no fuel supply chain reporting to complement fuel marking program; recommendation to implement supply chain reporting to find gaps.
- Collaboration and information exchange:
  - Increase collaboration domestically and internationally to fight informality, smuggling, corruption, and counterfeit imports.
  - Coordinate with other border agencies (agriculture, health, justice) and international partners.
  - Expand data sources for risk profiling: New Single Window, NCTS, AEO, other government departments (e.g., vineyards and tobacco growers from Department of Agriculture), advanced passenger information from airlines.
- Special tax zones and entities:
  - Current controlled entities: 670 entities including over 400 bonded inward processors and 183 fishing operators.
  - Recommendation: reduce number of special tax zones/entities; entitlement to such status should be regularly reviewed to minimize administrative controls.

### Key statistics and tables
- Table 3. Use of Customs Clearance Channels (Single Administrative Documents)
  - 2014: Green/Blue Percent 0, Yellow Percent 89.20, Red Percent 10.35, Total Single Administrative Documents 415,775
  - 2015: Green/Blue Percent 0.7, Yellow Percent 88.52, Red Percent 10.26, Total Single Administrative Documents 421,987
  - 2016: Green/Blue Percent 4.01, Yellow Percent 83.67, Red Percent 11.92, Total Single Administrative Documents 451,497
  - 2017: Green/Blue Percent 6.24, Yellow Percent 85.28, Red Percent 8.07, Total Single Administrative Documents 498,789
  - 2018: Green/Blue Percent 15.87, Yellow Percent 75.60, Red Percent 8.05, Total Single Administrative Documents 540,050
  - 2019 (End 08): Green/Blue Percent 19.53, Yellow Percent 72.63, Red Percent 7.47, Total Single Administrative Documents 405,098
  - Source note: GDC, excludes rerouted Single Administrative Documents c.0.5 percent
- Table 4. Gross National Taxes Collected by GDC (ALL Million)
  - Circulation Tax: 2016 16,557; 2017 13,102; 2018 16,613; 2019 Jan – Oct 14,045
  - Carbon Tax: 2016 2,164; 2017 1,763; 2018 2,034; 2019 Jan – Oct 1,897
  - Mineral Royalties: 2016 2,804; 2017 2,333; 2018 2,618; 2019 Jan – Oct 2,049
  - Other: 2016 1,539; 2017 1,625; 2018 1,627; 2019 Jan – Oct 1,922
  - (Source: GDC)

### MTRS short- and medium-term recommendations for customs administration
- Short-Term (First 12 months):
  - Increase the number of authorized economic operators.
  - Centralize all risk profiling into one national center.
  - Improve risk filters, to allow for greater than 33 percent through the Green Channel.
  - Enact legal provisions for NCTS.
  - Increase collaboration in the fight against informality, smuggling, corruption and importation of counterfeit goods.
  - Develop a more professional and agile workforce.
  - Assign responsibility for the administration of all fuel related taxes to one agency.
  - Implement an integrity framework.
- Medium-Term (One - Four Years):
  - Continue to invest in information technology.
  - Implement NCTS system.
  - Roll-out the Single Window.
  - Reduce the number of special tax zones and entities.
  - Expand further the use of the Green Channel (greater than 50 percent).
  - Develop and implement a supply chain monitoring system for fuel.
  - Develop further risk profiling, using advanced data analytics.
  - Develop advanced analytics capabilities.
  - Expand information exchange with partners domestically and internationally to improve risk profiling.

### MTRS governance arrangements and implementation (paragraphs 96–101)
- Leadership and governance:
  - MOFE must take leadership of the tax system reform agenda.
  - MTRS is comprehensive, spans multiple agencies and years.
- MTRS Steering Committee:
  - Formed and chaired by the Minister of Finance and Economy.
  - Membership: two Deputy Ministers, the Minister’s head of cabinet, Directors General of revenue administrations.
  - Representatives are senior and should be accountable for implementing reform actions within their agencies.
  - Progress should be reported regularly to the Council of Ministers.
  - Recommendation: review composition to ensure broader whole-of-government representation (e.g., Prime Minister’s Office, Labor, Justice, Economy, Environment, NAIS).
- MTRS Technical Secretariat:
  - In place, chaired by the advisor to the Minister for Finance and Economy.
  - Includes senior representatives from MOFE, GDT and GDC.
  - Broader whole-of-government representation should be considered.
- MTRS Program Management Office (PMO):
  - Not currently supported by a full time PMO.
  - Proper resourcing is critical.
  - PMO responsibilities: develop implementation plan, phase and schedule deliverables, outline resourcing requirements (especially for technology), develop reporting system, coordinate external stakeholder consultation.
  - Assignment of resources to the MTRS PMO is an urgent priority.
- Project management within revenue agencies:
  - GDT already has a Project Office.
  - GDC needs to establish a Project Office to oversee customs-related MTRS reform plans.
  - Each Project Office will prepare project plans, monitor/report progress, and raise issues to the administration, PMO, or Steering Committee.

### MTRS recommendations — short term (implementation focus)
- Establish MTRS Program Management Office.
- Strengthen the composition of the MTRS Steering Committee.
- Establish a GDC Project Office.
- MTRS Steering Committee approve the MTRS draft by January 31, 2020.
- Ensure attention to linkages and dependencies among major MTRS measures so critical reforms are prioritized and properly sequenced.

### Next steps and external capacity development (paragraphs 102–104)
- Integrate revenue administration options and tax policy options into Albania’s MTRS (overview at Appendix VIII).
- Steering Committee must complete the MTRS in accordance with the action plan (current draft at Appendix IX), with timeline adjustments for earthquake recovery priorities.
- IMF stands ready to provide ongoing support and guidance for the next phase.
- External development partners interested in support include the EU, SECO and the World Bank.
- Recommendation: establish arrangements to coordinate external support to avoid duplication and conflicting advice.
- MOFE and each revenue agency’s project office should be organizational contact points to:
  - Identify priority areas for external support.
  - Determine appropriate development partners.
  - Mobilize support and enter into project agreements.
  - Monitor delivery, implementation effectiveness, and results.

*Italic: Content derived from the provided IMF source document.*

### Appendix I. MTRS Gap Analysis

### Appendix I. MTRS Gap Analysis

### I. Setting revenue and other goals
- Government overarching development priority: European Integration.
- Fiscal objectives stated:
  - Authorities intend to bring fiscal deficit further down, and to accelerate the reduction in public debt.
  - Given no space on expenditure side, stronger revenue measures are needed, including: a simple, predictable tax system, significantly broadened tax base, fully-functioning VAT refund system that doesn’t distort investment decisions.
- Additional expenditure needs for development/economic agenda:
  - Not yet determined; the additional expenditure needs of the strategy—beyond the baseline trends—has not yet been quantified.
  - Consequently, no quantitative tax-revenue-level change has been determined to date.
- Revenue mobilization target:
  - Not yet determined.
  - Suggested alignment: MTRS timeframe can be aligned with the timeline of the SDS (i.e. 2019-2030), but with an interim medium-term target for the next 4/5 years as the focal point.
  - Not yet linked to medium-term expenditure level needs.
- Other high-level objectives (beyond revenue mobilization) have been stated in generic terms:
  - public administration reform, stable institutions and a modern, professional and depoliticized civil service;
  - strengthening the independence, efficiency and accountability of judicial institutions;
  - increasing the fight against corruption;
  - increasing the fight against organized crime;
  - ensuring the protection of human rights (including property rights).
  - These objectives have not yet been clearly reflected in reform initiatives and specific objectives (e.g. reducing taxpayers’ compliance costs) have not been identified.
- Consultation and country-ownership:
  - Far-reaching consultation was done for the development of the SDS 2030 agenda.
  - Efforts to achieve far-reaching and active stakeholder involvement specifically to develop a country-owned revenue strategy have not yet been undertaken.
  - Country-ownership across all stakeholders is not yet achieved.

### II. Comprehensive tax system reform to achieve goals
- Mapping and comprehensive plan:
  - No mapping of the several tax system reform initiatives covering policy, administration, and legal framework is yet available.
  - No single comprehensive plan (policy, administration, legal framework) has been formulated to achieve the government’s goals.
  - Several policy and administration reform initiatives exist but are scattered across several government entities with no integral view of contribution to overarching strategic objectives.
- Policy and administration sequencing and packages:
  - The revenue goal has not been divided into policy and administration components because the revenue-level change has not been set.
  - Policy reform initiatives are not grouped as a revenue policy package, nor is there an estimation of their impacts on revenue mobilization and other objectives.
  - Administration reform initiatives are not clearly grouped into a modernization agenda of the revenue agencies; they focus on modernizing key operations and support areas (e.g. filing and payment, BPR and ICT driven projects) without estimation of impacts to ensure sustained revenue-level change.
  - Sequence of changes is not well-defined to enable active management, legislative changes, and timely progression toward revenue goals.
- Quantification of impacts:
  - No realistic assessment has been conducted of how much revenue policy and administration measures can generate to achieve a revenue objective on a sustainable manner or on a yearly basis until achieving the target revenue level.
  - No assessment has been conducted to estimate impacts on other objectives.
- Administration reform initiatives and governance:
  - A comprehensive second-generation GDT reform plan for 2019-2021 provides a good framework for advancement over the next three years; updates, streamlining, and reprioritization are required in some areas.
  - The GDT has a strong governance framework including a senior management committee structure (three committees: Operations-Reforms-Compliance).
  - Implementation plans and performance indicators are in place; follow-up is undertaken monthly through committee meetings.
  - Previous planning considered merging tax and customs agencies; on IMF advice, merger is no longer a government priority. Some cooperation exists (e.g. extensive data exchange) but reform agendas of the two agencies are independent and synergies have not been defined.

### III. Sustained political commitment from formulation to implementation
- Government leadership and whole-of-government approach:
  - Digital-supported reform initiatives are recognized as government-led at the highest level; the President declared digitalization a priority and the Ministry of Finance is leading digital modernization initiatives of the ETA.
  - Other tax system reform initiatives are scattered and not part of a single comprehensive government plan; no high-level government leadership has yet been committed for the overall tax system reform.
  - Broad buy-in across government for overall tax system reform is not yet nurtured. Cross-agency collaboration exists in some initiatives (e.g. customs single window) and ad-hoc working groups are created when legal changes are required.
  - No whole-of-government approach is nurtured for addressing cross-agency issues arising in reform processes.
- Parliamentary involvement:
  - Parliament appears to be involved when some initiatives will require legislative changes; not yet timely involved in a comprehensive reform plan.
- Reform governance arrangements for the MTRS:
  - Current reform efforts have governance arrangements associated with specific initiatives (e.g. ETA digitalization with direct involvement of the Minister of Finance).
  - For the formulation of the Albania MTRS, a new government arrangement has been created comprising an MTRS Steering Group (advisors and unit heads at the MOF and heads of revenue agencies) and a Technical Secretariat as the MTRS project team.
  - The Technical Secretariat is very small (just 4 people) and the team has no full-time dedication.
  - Implementation plans exist for some specific reform initiatives.
- Resources and communication:
  - Current revenue agencies’ reform initiatives do not comprehensively quantify multi-year resource and expenditure costs; resources are allocated on a year basis.
  - No clear comprehensive communication strategy is in place for a tax system reform plan; some communication exists for specific initiatives.

### IV. Coordinated capacity-development support from formulation to implementation
- Mapping and alignment of CD support:
  - The Albanian MOF has a designated international cooperation unit dealing with capacity development partners coordination and is compiling CD support received across government.
  - A tax-system-reform-focused CD support mapping has not yet been prepared.
  - CD support is relatively limited at this stage and alignment is more at the reform-initiative level.
  - In tax administration, CD support is aligned to the GDT’s reform plan.
  - CD needs will be determined during formulation of the MTRS in the coming months.
- Coordination mechanisms:
  - The new unit at the MOF is working on guidance as part of stocktaking across government; not yet specific to tax system reform.
  - Clear mechanisms for incorporation and coordination of development partners to avoid overlapping/competing CD support are not yet established for tax system reform.

---

### Appendix II. Indirect Audit Methods

- Purpose and context:
  - Central to audit effectiveness is arriving at a reasonably accurate assessment of the taxpayer’s correct tax liability.
  - SMEs and taxpayers with weak third-party reporting pose a considerable risk of unreported income or overstated expenses.
  - Poor quality or non-existent books and records complicate direct verification; auditors need tools to indirectly measure taxable income.
- Common indirect audit methods:
  - Source and application of funds method: analysis of cash flows; net increases/decreases in assets and liabilities; nondeductible expenditures and nontaxable receipts considered; excess of expenditures over reported and nontaxable income is unreported taxable income.
  - Bank deposits and cash expenditure method: computes income by showing what happened to taxpayer’s funds—either deposited or spent.
  - Mark-up method: reconstruct income using percentages or ratios typical for the business; analysis of sales and/or cost of sales and application of an appropriate percentage of markup to arrive at gross receipts.
  - Unit and volume method: determine gross receipts by applying sales price to volume of business; volume may be determined from taxpayer’s books if records are adequate on cost of goods sold or expenses.
  - Net worth method: based on increases in net worth during a year, adjusted for nondeductible expenditures and nontaxable income; requires complete reconstruction of financial history accounting for all assets, liabilities, nondeductible expenditures, and nontaxable sources of funds.
- Conditions for use:
  - Indirect methods should be used only when auditor has established reasonable likelihood of unreported income, including circumstances such as:
    - A taxpayer's known business and personal expenses exceed reported income and non-taxable sources have not been identified;
    - Irregularities in books and weak internal controls;
    - Gross profit percentages change significantly year-to-year or are unusually high/low for the industry;
    - Taxpayer's bank accounts have unexplained deposits;
    - Taxpayer does not make regular deposits of income, but uses cash instead;
    - Review of prior and subsequent year tax declarations shows a significant increase in net worth not supported by reported income;
    - No books and records; or
    - No regular method of accounting or method used does not clearly reflect income.
- Legal and procedural safeguards:
  - Estimated assessments using indirect methods must be reasonable and not arbitrary.
  - The law should clearly authorize use of indirect audit methods and reverse the burden of proof when an estimated assessment is based on indirect methods, placing burden on taxpayer regarding appropriateness of recalculated tax basis.
  - Tax administrations must make a genuine attempt to determine income; courts require estimates to be based on reasonable grounds and to consider taxpayer’s specific circumstances.
- Implementation considerations for Albania:
  - Introduction of indirect audit methods must be managed carefully; this approach is established international good practice but will be new for local taxpayers and courts.
  - GDT should anticipate significant levels of complaint and disputation during initial implementation.
  - Auditors must be well-trained in indirect methods and provided detailed procedural guidelines.
  - It would be prudent to liaise with the judiciary and taxpayer representatives to ensure awareness of acceptance of this approach in other jurisdictions.

*Source: 1albea2022003 - Appendix I. MTRS Gap Analysis*

### 6.      The first cases should be subject to stringent quality assurance reviews before final

### 6.      The first cases should be subject to stringent quality assurance reviews before final assessments are issued.

### Quality assurance and pilot approach for indirect audit methods
- The first cases using indirect audit methods should be subject to stringent quality assurance reviews before final assessments are issued.
- Given the anticipated adverse reaction of local taxpayers, consider authorizing only a few highly trained and competent auditors to apply the indirect audit methods in the first instance to create successful case studies to guide the broader cohort of auditors.
- These auditors should have a strong knowledge of:
  - the tax laws and procedures,
  - accounting standards,
  - business practices.

### Appendix IV — Illustration of design and implementation rules for laws and regulations
- No unnecessary regulations: consider non-legislative options such as information guidelines, incentives, corporate social responsibility, voluntary sector agreements.
- Simple and efficient: laws and regulation must be easy to comply with and entail as little administrative burden as possible.
- User involvement: involve businesses actively in formulation of new regulations and design of electronic systems.
- International context: consider experience with similar law in other countries; avoid unnecessary special rules and over-implementation.
- Growth orientated regulation: create stable conditions for growth, productivity and innovation while protecting environment, consumers, and ensuring food safety.
- Clear communication: communicate government requirements clearly and in advance of entry into force.
- Coordination: coordinate requirements and deadlines; seek better cooperation between authorities and electronic solutions so businesses report data once, in one location if possible.
- Visible service: dialogue must be characterized by mutual respect; inform businesses of their rights and service entitlements.
- Focus on individual businesses: consider size and production of individual businesses, especially SMEs; use electronic systems strategically to provide tailored interaction.
- Targeted enforcement: target enforcement where problems are greatest; reward compliant businesses with less supervision.

(Source: OECD 2019 – Danish Government De‑Bureaucratization Plan for Laws Impacting Businesses.)

### Appendix V — Framework for reducing corruption vulnerabilities: Good governance in revenue administration
- Sound Policy and Legislation
  - 1. Revenue policy designed based on principles of equity, efficiency/neutrality, simplicity, and transparency.
  - 2. A common set of administrative and procedural laws that are simple and reliable for different tax types.
  - 3. Legal framework provides appropriate balance between rights of taxpayers and powers of revenue administration, supported by effective dispute settlement procedures (e.g. independent tribunal/court or tax ombudsman) and legal safeguards against the improper exercise of powers by revenue administration (e.g. opportunity for taxpayers to pay overdue taxes before forced sale of property seized through distraint).
  - 4. A system of tax self-assessment is in place promoting voluntary compliance by taxpayers.
  - 5. Clarity and stability of law, rules, and processes, including minimal discretionary power vested in the revenue administration, and where discretion is unavoidable, clear conditions on how discretion will be exercised.
  - 6. Legal and human resource frameworks allow for firing of officers behaving unethically and provide a suite of appropriate sanctions for cases of lower culpability, with prosecution for criminal activities.
  - 7. Legislation allows for adoption of modern systems, processes and technology in revenue administration and sets out key aspects of organization and management (including relationship between Ministry and the revenue administration), including express legislative requirements for revenue administration to provide and publish reports on its operations and financials on a regular basis.
- How these features reduce vulnerabilities to corruption (corresponding outcomes)
  - 1. Raises revenue in non-distortive manner; creates a revenue system that is easily understood and harder to avoid or evade.
  - 2. Provides common basis for administration of all taxes regardless of tax types, thus promoting fairness and ease of understanding and application by tax officers.
  - 3. Supports the building of society’s trust in revenue administration.
  - 4. Minimizes intrusion of revenue officials in the affairs of compliant taxpayers.
  - 5. Increases transparency; provides certainty to avoid disputes; reduces discretion that can be misused by dishonest officials.
  - 6. Provides basis for effective human resource practices to curb corruption.
  - 7. Provides legal basis for effective administration to minimize interference and opportunities for corruption.

- Modern Systems and Processes
  - 8. Revenue administration work plans, budget, performance objectives, and outcomes are regularly publicly reported.
  - 9. Collection systems and procedures are streamlined to secure timely revenues without imposing undue compliance cost and inconvenience to the business.
  - 10. Service-oriented approach ensuring taxpayers have the information (quantity, quality, comprehensiveness) and support they need to meet their obligations voluntarily.
  - 11. Availability of a tax rulings function with clear and straightforward rules to avoid distinct tax treatments that deviate from the general rules and pose transparency concerns.
  - 12. A general risk-based approach is adopted in the administration aimed at detecting and acting on taxpayers who present the greatest risk to the revenue system.
  - 13. Special programs using modern and transparent approaches to manage the compliance of the largest contributors, including large businesses, high-wealth individuals, and high-income earners.
  - 14. Effective and impartial dispute resolution process is available and publicized.
- How these reduce vulnerabilities (corresponding outcomes)
  - 8. Increases transparency and public accountability of revenue administration.
  - 9. Minimizes intrusion of revenue officials in the affairs of compliant taxpayers, avoiding rent seeking behaviors.
  - 10. Empowers taxpayers; reduces interactions with officials; reduces vulnerability to corruption by dishonest officials making unlawful demands.
  - 11. Provides certainty for tax treatment of transactions; empowers taxpayers in discussions with revenue officials.
  - 12. Removes discretion, minimizes intrusion of revenue officials in the affairs of compliant taxpayers.
  - 13. Focuses resources on highest risks to revenue; helps preserve the integrity of the tax system by ensuring that the wealthy in society pay their fair share.
  - 14. Protects taxpayers from unsubstantiated or corrupt tax assessments.

- Streamlined Organization and Management
  - 15. Revenue administration is established with independence from political direction, e.g., reports to Minister of Finance who has overall fiscal responsibility, rather than to the Prime Minister or President.
  - 16. A function-based organization design with separation of duties and appropriate numbers of staff assigned to each function based on workload.
  - 17. Strong headquarters function providing oversight and uniform operations across the field network.
  - 18. Streamlined field operations and organizational alignment to key taxpayer segments.
  - 19. Effective internal audit and investigation/anti-corruption units established, with relationships and cooperation with public service wide anti-corruption activities and bodies.
  - 20. Strong oversight of revenue administration by external bodies (General Audit Office, Ministry of Finance) focused on monitoring performance but not allowed to interfere in specific taxpayers’ affairs.
- How these reduce vulnerabilities (corresponding outcomes)
  - 15. Reduces political interference in taxpayer affairs; increases ability of revenue administration to act independently in enforcing the laws.
  - 16. Removes one-to-one relationship between taxpayer and official; reduces under-employment and risk of corrupt behavior.
  - 17. Helps reduce vulnerability by establishing nationwide clear standardized processes and monitoring of operational performance of field offices.
  - 18. Improves quality of professional interaction with taxpayers; focuses resources on highest risks to revenue.
  - 19. Creates effective processes to identify and curb corruption.
  - 20. Increases accountability of revenue administration.

- Technology and Controls
  - 21. Revenue administration processes are digitalized and automated to the extent possible.
  - 22. Robust automated system of internal control checks and monitoring of processes, with access controls/audit logs.
  - 23. Automated risk assessment and case selection is in place.
  - 24. Technology supports notification of citizens about their obligations and correct procedures for revenue administration.
  - 25. Technology supports collection of feedback from the public on interactions with revenue administration staff, including reporting unethical behavior, e.g., through a dedicated integrity hotline.
- How these reduce vulnerabilities
  - 21. Reduces face-to-face interactions; minimizes intrusion of revenue officials in affairs of compliant taxpayers.
  - 22. Ensures integrity of decisions, allows review and audit of actions taken by revenue officials.
  - 23. Removes personal influence and staff discretion.
  - 24. Increases transparency and accountability of revenue administration.
  - 25. Supports detection and prevention of unethical and unprofessional behaviors.

- Leading People Management
  - 26. Human resource policies and processes assure merit-based selection, appointment, appraisal, and promotion of revenue officials.
  - 27. Senior management of revenue administration is appointed for a fixed period (tenure).
  - 28. Management process built on minimal management layers with appropriate spans of control, and internal control is one of the core management functions.
  - 29. Salaries set at a sufficient and competitive level.
  - 30. A formal rotation policy supports staff development, with a cycle to allow staff to build expertise and contribute to the respective function’s performance.
  - 31. Ongoing staff training programs delivered so officials know their duties, conditions of service, and sanctions for wrongdoings.
- How these reduce vulnerabilities
  - 26. Improves quality and professionalism of staff.
  - 27. Reduces vulnerability to cronyism.
  - 28. Ensures close monitoring of operations; reduces opportunities for corrupt behavior.
  - 29. Reduces incentive for corrupt behavior.
  - 30. Increases officials’ performance incentive and knowledge and expertise across all levels; increases taxpayer trust/satisfaction.
  - 31. Informs staff of required behaviors and risks of non-compliance.

- Institutionalized Promotion of Integrity
  - 32. Staff is regularly informed about and supported in adopting positive behavior; corporate practice, including through an enforced Code of Conduct, strongly signals zero tolerance towards low staff integrity.
  - 33. Technology solutions to detect unethical behavior are routinely used.
  - 34. Legal sanctions are effectively applied on each detected corrupt behavior and publicly announced.
- How these reduce vulnerabilities
  - 32. Management leads by example; creates a positive organizational culture and fosters “esprit de corps”; supports the prevention of unethical behaviors.
  - 33. Detects and prevents unethical behavior.
  - 34. Addresses and prevents unethical behavior; instills greater public confidence in revenue administration.

(Note: While the term revenue administration covers both tax and customs administrations, some of the information in this Box is more specific to the features of tax administration.)

### Appendix VI — Example of a compliance project approach for a high-risk industry
- Engage with relevant industry or business associations to explain why the industry is seen as high risk and to ensure accurate understanding of industry operations.
- Publicize intention to conduct a verification program and seek support of associations to inform members.
- Identify tax practitioners with significant client base in the targeted industry and request they inform their clients.
- Conduct a sample audit program to confirm the most serious areas of non-compliance and quantify the amount of tax at risk across the industry.
- Engage with industry association and tax practitioners to prepare advice to industry participants on areas of non-compliance identified.
- Send letters to taxpayers and/or communicate through associations and practitioners advising specific areas of non-compliance and requesting review and self-corrections.
- Highlight that voluntary disclosures will attract lenient penalties, and that further audits will impose full penalties on those who have not self-corrected.
- Offer free seminars and advisory visits for taxpayers unsure of their obligations, ideally conducted jointly with the industry association.
- Ensure enquiry staff is aware of the program and has scripted answers for enquiries, including how to make a voluntary disclosure, attend a seminar or request an advisory visit.
- Ensure collection enforcement staff apply reduced penalties and flexible payment arrangements to taxpayers who voluntarily self-correct.
- Conduct a follow-up audit program with wider coverage targeting taxpayers who failed to self-correct and prosecute the worst offenders.
- Publicize results of audits and prosecutions, highlighting how data matching and new approaches facilitated detection and using representative case studies to show how informal economy participants were identified and dealt with.
- Measure effectiveness of the project by tracking number of voluntary disclosures received, overall change in tax paid by taxpayers in the target industry, and surveying industry and practitioners to test for changes in observed compliance behavior.

### Appendix VII — MTRS governance framework (roles, responsibilities, and critical success factors)
- Minister of Finance and Economy
  - Role: The MTRS is a government led, country owned strategy. Leads development, communication and implementation of the MTRS. Reports progress on development and implementation of MTRS to government.
  - Critical success factors/responsibility: Government led strategy; requires strong political will and leadership; reports progress quarterly to Council of Ministers/Prime Minister.
- MTRS Steering Committee
  - Role: Empowered, technically strong central steering committee comprising representatives from key agencies; chaired by Minister or Deputy Minister of Finance and Economy.
  - Tasks: Approves action plan (including supporting implementation plans of responsible administrations); monitors progress through reports submitted by cross department working group; resolves cross department implementation issues.
  - Critical success factors: Departments and administrations need to be aligned to deliver MTRS; a whole-of-government approach is required; broader Department commitment needed beyond Fiscal Policy and Law, Domestic Tax and Customs Tax.
  - Reporting: Chair submits quarterly progress report — Dashboard Report summarizing overall status and key issues.
- Cross agency MTRS Project Management Office (PMO)
  - Membership: MOFE Advisor (Head), GDT – two senior officers, GDC – two senior officers.
  - Role: Assist with drafting of the MTRS; report progress against the MTRS Action Plan and Implementation Plan; manage follow-up and support Project Offices to implement SC decisions; identify implementation issues and escalate to the SC.
  - Critical success factors: Deadlines for MTRS drafting are met; respective Administrations implementing project plans; significant implementation issues identified and escalated to the SC as required.
- Separate Project Offices in GDT and GDC
  - Role: Prepare separate project plans for each MTRS reform for which the revenue administration is responsible; identify and seek approval for assignment of staff and other resources; monitor reforms to ensure adherence to implementation timetable; liaise with and complement PMO.
  - Critical success factors: Effective management and on-time delivery of MTRS projects assigned to individual revenue administrations; manage MTRS projects assigned to the relevant revenue administration; monitor and report on implementation of MTRS projects in the relevant revenue administration.

*Source: 1albea2022003.*

### APPENDIX VIII. DRAFT OVERVIEW OF THE MTRS OPTIONS

### APPENDIX VIII. DRAFT OVERVIEW OF THE MTRS OPTIONS

### Objectives
- Increase tax-to-GDP ratio by 2.2 to 3 percent of GDP in 5 years from a baseline of 25.9 percent.
- Tax Policy reform will contribute 1.4 percent & Tax Administration reform 1 percent of GDP.
- Reduce tax distortions and strengthen progressivity.
- Reduce compliance costs and improve Investment Climate.
- Improve community perception of tax and custom system fairness.

### Tax Policy Reform — Broad measures
- Broaden Tax Base:
  - VAT on private health/education services, over-the-counter medicines, fee based financial services, on first sale of new residential property.
  - Eliminate all VAT exemptions on intermediate inputs.
  - Eliminate zero rating on linked services to bonded warehouses.
  - Eliminate all exemptions and incentives on excises, national taxes and property tax.
  - Remove reduced business profits tax and exemptions.
  - Eliminate 6% compensation scheme for farmers.
- Adjust tax rates:
  - Eliminate 6% reduced VAT rate and tax all goods and services at the standard rate.
  - Raise property tax rates.
  - Raise environmental tax rates on plastic packaging.
- Simplify the tax system:
  - Unify profits tax rate to 15%.
  - Switch from profit-based to cost based incentives for priority sectors.
  - Simplified presumptive turnover based regime for small businesses.
  - Professional individuals to be taxed through PIT.
  - Remove PIT threshold for individual declarations.
  - Harmonize SSC and PIT brackets.
  - Raise threshold for VAT and CIT, and apply threshold consistently across all taxpayers.

### Tax and Customs Administration Reform — Compliance improvement initiatives
- Reduce VAT Compliance Gap:
  - Optimize fiscalization with risk-based monitoring and follow up enforcement.
  - Reverse charge mechanism for the construction sector.
  - Focused compliance improvement plans for identified high risk sectors.
  - Additional anti VAT fraud mechanisms such as ‘joint and several liability’.
- Reduce levels of undeclared work and underreporting:
  - Develop a more holistic and integrated approach.
  - Improve inter-agency cooperation.
  - Extend categories of persons required to file PIT.
  - Strengthen criminal sanctions.
  - Improve analytics and data sharing.
  - Develop partnerships with business and community.
  - Improve quality and reliability of financial statements.
  - Whole-of-government action plan to reduce cash economy.
- Reducing Artificial Tax Avoidance:
  - Ensure the general anti-abuse rule (GAAR) can be effectively implemented.
  - Enact anti-avoidance measures against bogus self-employment.
  - Establish a specialist anti-avoidance unit.
- Taxing Unexplained Wealth:
  - Target significant unexplained wealth and provide powers to assess tax by indirect methods.
  - Target offshore related tax evasion using CRS framework.
  - Incentivize past offshore related evasion through a voluntary disclosure program (VDP).
  - Widen VDP to include domestic funds and assets.
  - Establish an investigation task force to deal with VDP.
  - Collect taxes evaded related to corruption and other financial crimes in cooperation with other agencies.
- Reducing taxpayer compliance costs and increasing certainty:
  - Develop a taxpayer services strategy.
  - Improve technical interpretive guidance.
  - Improve tax product and process design by consulting users.
  - Pay VAT refunds on time and ensure SOEs pay their taxes.
  - Transfer taxpayer appeals function to GDT.
  - Strengthen GDT’s integrity framework.
- Increase operational independence and stability of leadership:
  - Give more autonomy in org design, budget management, HR, and performance standards.
  - Ensure stability of leadership for period of MTRS.

### Tax Administration — Building institutional capacity and modernization
- Organisational and service delivery reforms:
  - Shift fiscal monitoring work to the Audit Directorate.
  - Consolidate operational work into no more than 3 offices.
  - Channel all telephone enquiries to the national call center.
  - Expand outbound call center activities.
- Data, analytics and CRM:
  - Widen access to 3rd party data.
  - Ensure Data Warehouse is implemented with fiscalization.
  - Acquire modern analytics skills, software & partner with universities, etc., to optimize use of analytics.
  - Build a stronger CRM capability.
- Workforce and capability development:
  - Expand tax academy, partner with universities and other tax jurisdictions.
  - Work with industry to assist upskilling LTO staff.
  - Acquire CAAT software.
  - Recruit/select a cadre of staff for intensive technical training, including national call center.
- Modernize Customs Administration:
  - Enhance trade facilitation (AEO, Single Window & NCTS).
  - Centralize risk profiling and improve risk filters, analysis and skills.
  - Increase collaboration in fight against informality & smuggling.
  - Responsibility for fuel related taxes assigned to one agency.
  - Invest in IT.

### Legal Framework Reform — Legislative priorities
- Update Customs Code to modernize and streamline customs administration, including legal provisions for NCTS.
- Legislative measures to ensure effective tax collection in the digital economy.
- Legislative measures to strengthen controls over international tax avoidance and evasion.
- Update real estate tax law including revised basis for valuations.
- Legislation to impose limits on cash transactions by consumers for provision of professional services.
- Legislation to compel professionals to install electronic funds transfer POS terminals in their offices.
- Legislation to allow use of indirect audit methods.
- Engage and involve taxpayers and tax intermediaries in designing tax laws, regulations, forms, procedures and reporting systems, with view to simplify tax system and reduce compliance costs.

### Political Support and External Resources
- Reform will be government-led, and overseen by the Steering Committee at MOFE:
  - A whole of government approach.
  - Engage a wide base of stakeholders.
  - Quantify key performance indicators and tightly monitored MTRS implementation.
  - Evidence-based analysis of tax system reforms, including impact on revenue, income distribution and the economy.
  - Multi-year budget to secure reform implementation.
- External support to the following areas:
  - Revenue forecasting and expenditure analysis.
  - Administration performance monitoring including tax gap analysis.
  - Policies and procedures to strengthen monitoring and taxation of cross-border dealings.
  - Information strategy, data management and analytics.
  - Taxpayer compliance risk management.
  - Advanced rulings programs for tax and customs.
  - Drafting of new legislation and legislative amendments.
  - International profit shifting and tax avoidance.
  - Digital economy.

### MTRS Action Plan — Key timeline highlights (selected)
- Minister confirms commitment to MTRS Effort: July 1, 2019 — July 1, 2019 — Completed.
- Formalize MTRS Management and Governance Structure: July 9, 2019 — July 16, 2019 — Completed.
- Working Group (Steering Committee): July 9, 2019 — July 16, 2019 — Completed.
- Strengthen Technical Secretariat with full time staff (Future MTRS MO): July 9, 2019 — July 30, 2019 — Completed.
- Appoint Liaison points in participant entities/agencies: July 9, 2019 — July 16, 2019 — Completed.
- Map of Reform Initiatives: July 16, 2019 — September 30, 2019 — Completed.
- Expenditure needs determination: August 8, 2019 — October 31, 2019 — Completed.
- Revenue and other goals setting: August 8, 2019 — October 31, 2019 — Completed.
- Missions and consultations (policy and RA): October–November 2019 — several entries marked Completed.
- MTRS draft: January 10, 2020 — January 10, 2020; Approved by WG/SC: January 10, 2020 — January 31, 2020.
- Public review and Consultation Phase: January 10, 2020 — March 30, 2020 (industry groups, civil society, other stakeholders, Government agencies).
- Revision and finalization of MTRS: April 1, 2020 — April 30, 2020.
- Publication and advocacy: May 1, 2020 — June 30, 2020.
- Implementation begins (timeline continuation indicated; Draft MTRS Formulation Action Plan task start date July 1, 2020).

*APPENDIX VIII. DRAFT OVERVIEW OF THE MTRS OPTIONS*

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_Source: https://www.imf.org/-/media/files/publications/cr/2022/english/1albea2022003.pdf_