## PREFACE

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---

### Mission scope and purpose
- A tax administration mission to the Tax Administration of Kosovo (TAK) was undertaken during the period of November 19-25, 2024, as part of the IMF Fiscal Affairs Department’s (FAD) capacity development (CD) program concerning revenue administration in Southeast Europe.
- Main purpose: assess progress, advise on key areas for future reform, and prepare a CD plan to support TAK’s reform implementation in 2025.
- The review was undertaken against the findings of the 2022 Tax Administration Diagnostic Assessment Tool (TADAT) assessment and TAK’s midterm evaluation of the Revenue Administration Strategic Plan 2022-2026.
- Mission team: Mr. Frank van Brunschot (FAD) and Mr. Jim Sorensen (FAD revenue administration advisor for Kosovo). Ms. Debra Adams, division chief of FAD’s Revenue Administration 1 division, attended some meetings.
- Stakeholder meetings included: Mr. Hekuran Murati, Minister of Finance, Labor and Transfers; Mr. Ilir Murtezaj, TAK’s acting Director General (DG); Mr. Arian Zeka - Executive Director & Authorized Representative – American Chamber of Commerce; Ms. Lebibe Haliti, Executive Director Kosovo Business Registration Agency (KBRA); and representatives of international organizations including the European Union’s (EU) Office in Kosovo, and the German Society for International Cooperation (GIZ).

### Report structure
- The report comprises an Executive Summary and four sections: (I) Introduction; (II) Reform Progress Review; (III) Further implementation of the Strategic Plan; and (IV) Capacity Development.

### Executive Summary — key findings
- The report reviews midterm progress and achievements under TAK’s Strategic Plan 2022 – 2026.
- TAK’s mission: maximize voluntary compliance, provide professional, transparent, and effective services, and ensure fair, efficient and cost-effective revenue collection.
- The Strategic Plan includes 83 strategic actions, with 35 already successfully implemented.
- Drivers of success identified: consistent senior management commitment, a mature CRM framework, and effective debt management strategies.
- ISORA benchmarking: TAK's scores for seven out of eight indices are higher compared to Emerging Market Economies (EME), and meet or exceed the average for Advanced Economies (AE) for five indicators.
- TA-AYT revenue estimate: an extra potential revenue increase between 0.5 and 0.9 percent of GDP over the period 2025 – 2028.
- Remaining challenges: digital transformation and human resource capacity.

### Executive Summary — recommended priorities
- Continue implementing the Strategic Plan to maintain momentum in addressing the primary risks of digitalization and human resources.
- Prioritize the use of domestic and international third-party data; enhanced use of third-party data has substantial positive impact on compliance and revenues.
- Invest in improving data quality and enhance stakeholder partnerships, in particular with the Ministry of Finance, Kosovo Business Registration Agency (KBRA), and business associations.
- Initiate strategic planning for Digital Transformation and develop a new Strategic Plan 2027 - 2031, aligned with Kosovo’s E-government strategy.

### Introduction — historical context and recent performance
- TAK was established in January 2000 and has progressed from creating a functioning tax system and building institutional capacity to strengthening strategic planning, CRM, and core tax administration functions.
- Revenue collections have trended upwards in recent years (except 2020); strong revenue performance continued into 2024.
- TA-AYT attribution since 2017: an estimated 1.1 percent of the growth in tax-to-GDP attributed to tax administration reform improvements; main contributors: strengthening of CRM (0.65 percent) and increasing use of third-party data (0.24 percent).
- ISORA participation provides comparative analysis via eight indices; TAK outperforms EME averages on seven indices and equals or exceeds AE averages on five indicators.

### Fiscal and program context
- Kosovo receives IMF budget support via two IMF programs:
  - Stand-By Arrangement (SBA) of SDR 80.2 million.
  - Resilience and Sustainability Facility (RSF) SDR 61.95 million.
- As of November 2024, IMF staff and Kosovo authorities reached staff-level agreement on policies for completion of the third reviews under both arrangements.
- Operational notes: the SBA has been treated as precautionary by the authorities without any purchases; RSF disbursements were made but resources are earmarked in the budget law for renewable-based energy and other climate-friendly interventions.
- To date, all quantitative performance criteria, indicative targets, and structural benchmarks have been met.
- One DSR is equivalent to USD 1.3123 (November 21, 2024).

### EU Progress Report — summary of findings (as presented)
- Positive findings:
  - Good performance in tax collection, enforcement, and compliance.
  - Adoption of Law on Tax Administration and procedures.
  - Progress in bilateral agreements on double taxation.
  - Progress on service digitalization and service delivery.
  - Intensified risk-based approach regarding tax compliance.
  - Increased analytical capacity.
  - Started activities for high-wealth individuals.
- Areas needing improvement:
  - Finalized strategy for combatting informal economy, but not yet approved.
  - No progress on revision of tax policy.
  - Tax gap still needs to be finalized.
  - Not been able to join inclusive framework.
  - Professional capacities need to be strengthened.
  - The IT infrastructure of the TAK remains obsolete.

### TAK provides contemporary taxpayer services — Taxpayer services and outreach
- TSD continuously shares information with the public through TAK’s website, social media (Facebook, Instagram), print and electronic media campaigns, seminars, training sessions, and brochures such as “Tax Treatments of Electronic Supplies.”
- A survey was conducted to evaluate taxpayer satisfaction with TAK's services and performance.
- Procedures have been prepared and approved by the Director General (DG) for three new digital services: (i) Request for Debit-Credit Compensation, (ii) Sending Notifications to Taxpayers, and (iii) Request for Opening Tax Accounts; these procedures are not yet developed due to limited resources.
- Strengthening collaborative relationships with external stakeholders, in particular large businesses and business representatives, is identified as crucial for optimizing taxpayer education, service delivery, and compliance initiatives.

### Modernizing tax administration — IT, digitalization, and debt management
- Mandatory e-filing and e-payment systems introduced in 2022 significantly improved tax administration efficiency.
- The Taxpayer Portal enables online tax declarations, payments, and updates, enhancing taxpayer engagement and compliance.
- The core IT system is a highest operational risk: current system is functional but outdated, limiting advanced analytics and real-time compliance tracking.
- TAK plans to update the IT system next year, ensuring vendor support; the planned update will enhance cybersecurity measures but will not provide additional functional value.
- The DG intends to engage an external partner for a complete risk assessment of the current IT system.
- Ongoing priorities: gradually expand functionalities within the taxpayer portal, risk management, e-invoicing, and cash management.
- Constraints: funding shortages and a limited IT workforce; need for improved human resource capacity and investment.
- Recommendation: Implement a Commercial Off-The-Shelf (COTS) solution to digitalize revenue administration, enhance user-friendliness and transparency, and engage stakeholders in change management.
- Debt management: TAK has adopted international good practices and centralized debt collection; VAT on-time payments increased from 87.9 percent in 2022 to 90.5 percent in 2023 and reached 93.0 percent among large taxpayers.
- Priority actions for debt management: case management, largest debt cases, stronger enforcement measures, and writing off or canceling debts.
- TAK is the leading Tax Administration in the South East Europe regional Community of Practice on debt management.

### Building staff and institutional capacity
- Organizational changes: MTD consolidated into a single center in Pristina, with staff transferred from Regional Tax Departments; further centralization of processes should be prioritized.
- The first version of the Enterprise Risk Management (ERM) risk register identified 40 risks, of which 30 percent are related to HR.
- Staff capacity has been decreasing since 2019; TAK has not been allowed to recruit staff in recent years, contributing to an aged staff profile.
- The percentage of female staff is far below the regional average.
- Training needs for 2024 have been identified and are being addressed; greater institutional autonomy, effort and creativity are essential to enhance staff capacity and skills.
- Integrity framework: Integrity Plan for 2024-2026 includes eight measures to be implemented by July 1, 2024; five measures have been fully implemented and three are partially implemented. Rules and procedures for preventing conflicts of interest and the Code of Ethics and Conduct have been approved, and training on "Integrity and Anti-Corruption" has been conducted.

### Progress in achieving international good practices
- The 2022 repeat TADAT assessment indicated mixed performance across the nine performance outcome areas: scores for 20 out of 32 indicators were in the A-B range; scores for the other 12 indicators are in the C-D range.
- TAK concluded that the Strategic Plan 2022 – 2026 already actioned areas with lower TADAT scores; a recent TADAT self-assessment confirmed all C and D scores are already being addressed.
- Noted areas of good progress: accuracy of taxpayer information (P1-1), management of operational risks (P2-6), management of non-filers (P4-13), scope of verification actions (P6-19), use of large-scale data matching (P6-20), and adequacy of tax refunds (P8-28).

### Main drivers of reform progress
- Consistent senior management commitment supporting the "plan-do-check-act" cycle and institutional learning.
- High maturity in CRM enabling organization-wide compliance engagement and risk prioritization.
- Effective, patient debt management strategies yielding incremental improvements in compliance and revenue collection.
- Organizational culture focused on continuous improvement, transparency about challenges, and expert involvement.
- Mutual trust and collaboration between TAK management and FAD advisors facilitating reform implementation.
- Integrated assistance aligned with the Strategic Plan ensuring coherence and focused initiatives.
- Competitive spirit and regional knowledge sharing through Communities of Practice.

### Estimated revenue impact and implementation considerations
- TA-AYT tool estimates a potential additional revenue ranging between 0.5 and 0.9 of GDP from reform measures in the Strategic Plan 2022 – 2026 (0.5 lower bound; 0.9 point estimate).
- Main drivers of estimated revenue yield: increased use of third-party data, digitalization (in particular fiscalization), and accountability (in particular tax gap studies).
- Caution: lead times for implementing reform initiatives and availability of essential funding will affect when expected revenues materialize.
- Preconditions to realize revenue gains: secure current strengths, ensure IT infrastructure, and staff capacity.

### Recommendations for the second half of the Strategic Plan period
- Continue implementation of the Strategic Plan, prioritizing digitalization and human resources to address primary risks affecting revenue and tax administration operations.
- Prioritize the use of domestic and international third-party data to substantially improve compliance levels and revenues.
- Invest in data quality improvements and enhance stakeholder partnerships by addressing:
  - (i) data quality issues such as identity verification for businesses,
  - (ii) establishment of international agreements,
  - (iii) greater transparency in appeal procedures, and
  - (iv) enhancement of strategic partnerships with the Ministry of Finance, business associations, and KBRA.
- Initiate Strategic Planning for Digital Transformation: following completion of the Strategic Plan 2022 – 2026 action plan and the risk assessment of current IT systems, initiate development of the Strategic Plan 2027 - 2031 with a clear vision for digital transformation in collaboration with the Ministry of Finance and aligned with Kosovo’s E-government strategy.

### Capacity development and ongoing support
- FAD provided extensive capacity development (CD) through the Southeast Europe Project funded by the European Commission (EC) and the Swiss State Secretariat for Economic Affairs (SECO), including regional advisor support, CD activities on timely payment and debt management, and integrated initiatives on CRM improvement, data driven compliance, data analytics, and a blueprint for a modern data warehouse.
- VITARA online trainings: ten modules available covering institutional governance, reform management, performance management, strategic management, enterprise risk management, organization, information technology and data management, human resource management, CRM, and audit; TAK’s participation in VITARA is low.
- Other educational products available on the IMF revenue portal, including online training in TADAT and the VAT gap estimation model.
- FAD will continue CD support aligned with other stakeholders; in 2025 targeted assistance will focus on agile data driven compliance, preparations for international data exchange, and assistance on the analysis of tax gaps.
- Ongoing commitment to the three SEE Communities of Practice on CRM, debt management, and audit will continue to benefit TAK and other SEE tax administrations.

*Source: IMF Technical Assistance Report*

### PREFACE _______________________________________________________________________ 5

### PREFACE

### Mission scope and purpose
- A tax administration mission to the Tax Administration of Kosovo (TAK) was undertaken during the period of November 19-25, 2024, as part of the IMF Fiscal Affairs Department’s (FAD) capacity development (CD) program concerning revenue administration in Southeast Europe.
- Main purpose: assess progress, advise on key areas for future reform, and prepare a CD plan to support TAK’s reform implementation in 2025.
- The review was undertaken against the findings of the 2022 Tax Administration Diagnostic Assessment Tool (TADAT) assessment and TAK’s midterm evaluation of the Revenue Administration Strategic Plan 2022-2026.
- Mission team: Mr. Frank van Brunschot (FAD) and Mr. Jim Sorensen (FAD revenue administration advisor for Kosovo). Ms. Debra Adams, division chief of FAD’s Revenue Administration 1 division, attended some meetings.
- Stakeholder meetings included: Mr. Hekuran Murati, Minister of Finance, Labor and Transfers; Mr. Ilir Murtezaj, TAK’s acting Director General (DG); Mr. Arian Zeka - Executive Director & Authorized Representative – American Chamber of Commerce; Ms. Lebibe Haliti, Executive Director Kosovo Business Registration Agency (KBRA); and representatives of international organizations including the European Union’s (EU) Office in Kosovo, and the German Society for International Cooperation (GIZ).

### Report structure
- The report comprises an Executive Summary and four sections: (I) Introduction; (II) Reform Progress Review; (III) Further implementation of the Strategic Plan; and (IV) Capacity Development.

### Executive Summary — key findings
- The report reviews midterm progress and achievements under TAK’s Strategic Plan 2022 – 2026.
- TAK’s mission: maximize voluntary compliance, provide professional, transparent, and effective services, and ensure fair, efficient and cost-effective revenue collection.
- The Strategic Plan includes 83 strategic actions, with 35 already successfully implemented.
- Drivers of success identified: consistent senior management commitment, a mature CRM framework, and effective debt management strategies.
- ISORA benchmarking: TAK's scores for seven out of eight indices are higher compared to Emerging Market Economies (EME), and meet or exceed the average for Advanced Economies (AE) for five indicators.
- TA-AYT revenue estimate: an extra potential revenue increase between 0.5 and 0.9 percent of GDP over the period 2025 – 2028.
- Remaining challenges: digital transformation and human resource capacity.

### Executive Summary — recommended priorities
- Continue implementing the Strategic Plan to maintain momentum in addressing the primary risks of digitalization and human resources.
- Prioritize the use of domestic and international third-party data; enhanced use of third-party data has substantial positive impact on compliance and revenues.
- Invest in improving data quality and enhance stakeholder partnerships, in particular with the Ministry of Finance, Kosovo Business Registration Agency (KBRA), and business associations.
- Initiate strategic planning for Digital Transformation and develop a new Strategic Plan 2027 - 2031, aligned with Kosovo’s E-government strategy.

### Introduction — historical context and recent performance
- TAK was established in January 2000 and has progressed from creating a functioning tax system and building institutional capacity to strengthening strategic planning, CRM, and core tax administration functions.
- Revenue collections have trended upwards in recent years (except 2020); strong revenue performance continued into 2024.
- TA-AYT attribution since 2017: an estimated 1.1 percent of the growth in tax-to-GDP attributed to tax administration reform improvements; main contributors: strengthening of CRM (0.65 percent) and increasing use of third-party data (0.24 percent).
- ISORA participation provides comparative analysis via eight indices; TAK outperforms EME averages on seven indices and equals or exceeds AE averages on five indicators.

### Fiscal and program context
- Kosovo receives IMF budget support via two IMF programs:
  - Stand-By Arrangement (SBA) of SDR 80.2 million.
  - Resilience and Sustainability Facility (RSF) SDR 61.95 million.
- As of November 2024, IMF staff and Kosovo authorities reached staff-level agreement on policies for completion of the third reviews under both arrangements.
- Operational notes: the SBA has been treated as precautionary by the authorities without any purchases; RSF disbursements were made but resources are earmarked in the budget law for renewable-based energy and other climate-friendly interventions.
- To date, all quantitative performance criteria, indicative targets, and structural benchmarks have been met.
- One DSR is equivalent to USD 1.3123 (November 21, 2024).

### EU Progress Report — summary of findings (as presented)
- Positive findings:
  - Good performance in tax collection, enforcement, and compliance.
  - Adoption of Law on Tax Administration and procedures.
  - Progress in bilateral agreements on double taxation.
  - Progress on service digitalization and service delivery.
  - Intensified risk-based approach regarding tax compliance.
  - Increased analytical capacity.
  - Started activities for high-wealth individuals.
- Areas needing improvement:
  - Finalized strategy for combatting informal economy, but not yet approved.
  - No progress on revision of tax policy.
  - Tax gap still needs to be finalized.
  - Not been able to join inclusive framework.
  - Professional capacities need to be strengthened.
  - The IT infrastructure of the TAK remains obsolete.

*IMF Technical Assistance Report | 5*

### 14.        TAK provides contemporary taxpayer services. The Taxpayers Service Department (TSD)

### TAK provides contemporary taxpayer services. The Taxpayers Service Department (TSD)

### Taxpayer services and outreach
- TSD continuously shares information with the public through TAK’s website, social media (Facebook, Instagram), print and electronic media campaigns, seminars, training sessions, and brochures such as “Tax Treatments of Electronic Supplies.”
- A survey was conducted to evaluate taxpayer satisfaction with TAK's services and performance.
- Procedures have been prepared and approved by the Director General (DG) for three new digital services: (i) Request for Debit-Credit Compensation, (ii) Sending Notifications to Taxpayers, and (iii) Request for Opening Tax Accounts; these procedures are not yet developed due to limited resources.
- Strengthening collaborative relationships with external stakeholders, in particular large businesses and business representatives, is identified as crucial for optimizing taxpayer education, service delivery, and compliance initiatives.

### Modernizing tax administration — IT, digitalization, and debt management
- Mandatory e-filing and e-payment systems introduced in 2022 significantly improved tax administration efficiency.
- The Taxpayer Portal enables online tax declarations, payments, and updates, enhancing taxpayer engagement and compliance.
- The core IT system is a highest operational risk: current system is functional but outdated, limiting advanced analytics and real-time compliance tracking.
- TAK plans to update the IT system next year, ensuring vendor support; the planned update will enhance cybersecurity measures but will not provide additional functional value.
- The DG intends to engage an external partner for a complete risk assessment of the current IT system.
- Ongoing priorities: gradually expand functionalities within the taxpayer portal, risk management, e-invoicing, and cash management.
- Constraints: funding shortages and a limited IT workforce; need for improved human resource capacity and investment.
- Recommendation: Implement a Commercial Off-The-Shelf (COTS) solution to digitalize revenue administration, enhance user-friendliness and transparency, and engage stakeholders in change management.
- Debt management: TAK has adopted international good practices and centralized debt collection; VAT on-time payments increased from 87.9 percent in 2022 to 90.5 percent in 2023 and reached 93.0 percent among large taxpayers.
- Priority actions for debt management: case management, largest debt cases, stronger enforcement measures, and writing off or canceling debts.
- TAK is the leading Tax Administration in the South East Europe regional Community of Practice on debt management.

### Building staff and institutional capacity
- Organizational changes: MTD consolidated into a single center in Pristina, with staff transferred from Regional Tax Departments; further centralization of processes should be prioritized.
- The first version of the Enterprise Risk Management (ERM) risk register identified 40 risks, of which 30 percent are related to HR.
- Staff capacity has been decreasing since 2019; TAK has not been allowed to recruit staff in recent years, contributing to an aged staff profile.
- The percentage of female staff is far below the regional average.
- Training needs for 2024 have been identified and are being addressed; greater institutional autonomy, effort and creativity are essential to enhance staff capacity and skills.
- Integrity framework: Integrity Plan for 2024-2026 includes eight measures to be implemented by July 1, 2024; five measures have been fully implemented and three are partially implemented. Rules and procedures for preventing conflicts of interest and the Code of Ethics and Conduct have been approved, and training on "Integrity and Anti-Corruption" has been conducted.

### Progress in achieving international good practices
- The 2022 repeat TADAT assessment indicated mixed performance across the nine performance outcome areas: scores for 20 out of 32 indicators were in the A-B range; scores for the other 12 indicators are in the C-D range.
- TAK concluded that the Strategic Plan 2022 – 2026 already actioned areas with lower TADAT scores; a recent TADAT self-assessment confirmed all C and D scores are already being addressed.
- Noted areas of good progress: accuracy of taxpayer information (P1-1), management of operational risks (P2-6), management of non-filers (P4-13), scope of verification actions (P6-19), use of large-scale data matching (P6-20), and adequacy of tax refunds (P8-28).

### Main drivers of reform progress
- Consistent senior management commitment supporting the "plan-do-check-act" cycle and institutional learning.
- High maturity in CRM enabling organization-wide compliance engagement and risk prioritization.
- Effective, patient debt management strategies yielding incremental improvements in compliance and revenue collection.
- Organizational culture focused on continuous improvement, transparency about challenges, and expert involvement.
- Mutual trust and collaboration between TAK management and FAD advisors facilitating reform implementation.
- Integrated assistance aligned with the Strategic Plan ensuring coherence and focused initiatives.
- Competitive spirit and regional knowledge sharing through Communities of Practice.

### Estimated revenue impact and implementation considerations
- TA-AYT tool estimates a potential additional revenue ranging between 0.5 and 0.9 of GDP from reform measures in the Strategic Plan 2022 – 2026 (0.5 lower bound; 0.9 point estimate).
- Main drivers of estimated revenue yield: increased use of third-party data, digitalization (in particular fiscalization), and accountability (in particular tax gap studies).
- Caution: lead times for implementing reform initiatives and availability of essential funding will affect when expected revenues materialize.
- Preconditions to realize revenue gains: secure current strengths, ensure IT infrastructure, and staff capacity.

### Recommendations for the second half of the Strategic Plan period
- Continue implementation of the Strategic Plan, prioritizing digitalization and human resources to address primary risks affecting revenue and tax administration operations.
- Prioritize the use of domestic and international third-party data to substantially improve compliance levels and revenues.
- Invest in data quality improvements and enhance stakeholder partnerships by addressing: (i) data quality issues such as identity verification for businesses, (ii) establishment of international agreements, (iii) greater transparency in appeal procedures, and (iv) enhancement of strategic partnerships with the Ministry of Finance, business associations, and KBRA.
- Initiate Strategic Planning for Digital Transformation: following completion of the Strategic Plan 2022 – 2026 action plan and the risk assessment of current IT systems, initiate development of the Strategic Plan 2027 - 2031 with a clear vision for digital transformation in collaboration with the Ministry of Finance and aligned with Kosovo’s E-government strategy.

### Capacity development and ongoing support
- FAD provided extensive capacity development (CD) through the Southeast Europe Project funded by the European Commission (EC) and the Swiss State Secretariat for Economic Affairs (SECO), including regional advisor support, CD activities on timely payment and debt management, and integrated initiatives on CRM improvement, data driven compliance, data analytics, and a blueprint for a modern data warehouse.
- VITARA online trainings: ten modules available covering institutional governance, reform management, performance management, strategic management, enterprise risk management, organization, information technology and data management, human resource management, CRM, and audit; TAK’s participation in VITARA is low.
- Other educational products available on the IMF revenue portal, including online training in TADAT and the VAT gap estimation model.
- FAD will continue CD support aligned with other stakeholders; in 2025 targeted assistance will focus on agile data driven compliance, preparations for international data exchange, and assistance on the analysis of tax gaps.
- Ongoing commitment to the three SEE Communities of Practice on CRM, debt management, and audit will continue to benefit TAK and other SEE tax administrations.

*Source: IMF Technical Assistance Report*

---


_Source: https://www.imf.org/-/media/files/publications/tar/2025/english/tarea2025007-print-pdf.pdf_