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Kyrgyz Republic: Tax Administration Reform and Modernization Project

Sovereign (Public) Project | 39015-042 Status: Closed

ADB is supporting the Kyrgyz Republic in establishing an effective, modern, and efficient State Tax Service. The project will help put in place an integrated tax administration system with a central database and management information system, and a communication network for tax offices.

Project Name Tax Administration Reform and Modernization Project
Project Number 39015-042
Country Kyrgyz Republic
Project Status Closed
Project Type / Modality of Assistance Grant
Source of Funding / Amount
Grant 0077-KGZ: Tax Administration Reform and Modernization Project
concessional ordinary capital resources lending / Asian Development Fund US$ 10.00 million
Strategic Agendas Inclusive economic growth
Drivers of Change Governance and capacity development
Sector / Subsector

Public sector management / Public expenditure and fiscal management

Gender Equity and Mainstreaming No gender elements

The project will contribute positively to the Kyrgyz Republic's economic growth and poverty reduction by establishing a State Tax Service (STS) that (i) helps promote macroeconomic stability and provides fiscal space for priority economic and social expenditures through increased revenue collection; (ii) minimize corruption and practices good governance and transparency, and (iii) facilitates private sector development.

The outcome of the Project is an effective, modern, and efficient STS that achieves improvement in tax collection.

Project Rationale and Linkage to Country/Regional Strategy

The Kyrgyz Republic has maintained macroeconomic stability and achieved steady growth, despite economic and political shocks. During 2000-2005, real gross domestic product (GDP) growth averaged 3.9% and inflation remained modest at 4.4%. Notwithstanding political uncertainties in 2005-2006, structural reforms continued to progress. Growth in 2006 is estimated at about 3%, with inflation remaining below 6%. For 2007, GDP growth is projected to be 5.5% and inflation 4.5%.

Fiscal consolidation has been an important component in the Kyrgyz Republic economy's good performance, and will be vital in sustaining its achievements. The general Government fiscal deficit, which had exceeded 9% of GDP during 1996-2000, declined to about 5% of GDP during 2001-2005. Consequently, external public debt fell from 111% of GDP in 2001 to 70% of GDP in 2006. This fiscal achievement has been due to good control of expenditures and modest increases in tax collection. During 2000-2005, tax collection (excluding customs revenues and local governments) increased from 13.3% of GDP to about 15% of GDP.

The Kyrgyz Republic faces the dual fiscal challenge of maintaining its prudent fiscal policy to sustain macroeconomic stability and economic growth, while providing for priority economic and social expenditures to help raise per capita GDP above $540 and meet the Millennium Development Goals. The challenge requires sustained increases in tax collection.

However, tax administration was beset by inadequate equipment and facilities, inefficient practices, and inadequate staff skills. Consequently, tax collection was below potential, operations are error-ridden and prone to corruption, and tax administration was not perceived to be conducive to business and private sector development. The STS needed reform and modernization to install appropriate infrastructure, instill best practices in tax administration, reform its business processes and workflows, upgrade its staff's skills, and ensure that its operations use modern technology. These reforms enable STS to (i) increase its efficiency and staff skills, thereby improving its tax collection capacity, governance, and transparency; (ii) minimize corruption; and (iii) reduce compliance costs.

Impact Increased contribution of tax administration to fiscal consolidation and maroeconomic stability
Project Outcome
Description of Outcome Effective, modernized, and efficient State Tax Service
Progress Toward Outcome The project is now closed and the outcome has been substantially achieved. The development of the main component of the project - the Integrated Tax Administration System (ITAS) - has been finalized and rolled out in all tax offices, including in tax offices where before all operations were paper-based. More than 66,000 taxpayers have been electronically registered in the new centralized database (by June 2013).
Implementation Progress
Description of Project Outputs

Central database and management information system established

Communication network for tax offices developed

Establishment of modern central operations and improvement of taxpayers service

Status of Implementation Progress (Outputs, Activities, and Issues)

Substantially completed. The core modules have been rolled out in all tax offices.

Substantially completed. Central database is in place and being populated. MIS has been rolled out. Emergency data recovery center is in place.

Substantially completed. The core ITAS modules have been rolled out in all tax offices.

Partially completed. Protocol for electronic exchange of information with third parties has been developed and tested. An information exchange agreement was signed by STS and Customs on 30 April 2013. Integration with Treasury and commercial banks via ITAS is pending due to delays on the Treasury side.

E-filing implemented since 2010 and optional for all taxpayers, not just LTU clients.

More than 4,000 taxpayers are filing their tax returns electronically.

Substantially completed. All tax offices are electronically connected to the central database through Internet services provided by Kyrgyz Telecom, but bandwidth capacity outside Bishkek City and Chui oblast is weak. Layout of last-mile fiber optic connection in the northern regions (where Kyrgyz Telecom network is in place) has been completed.

Completed (2010)

Completed (2010)

The call center started functioning in the SSB in May 2012

One-stop shops with no-contact windows have been established in 22 offices covering 252,046 taxpayers

Geographical Location Ak-Suu, Alamedinskiy Rayon, Batken, Batkenskiy Rayon, Jalal-Abad, Jety-Oguz, Kadamjaiskiy Raion, Kara-Suu, Karakol, Kemin, Kzyl-Kiya, Lyaylyakskiy Rayon, Naryn, Nookat, Oktyabr', Osh, Sokuluk, Sulyukta, Talas, Tokmok, Tyupskiy Rayon, Uzgen, Ysyk-Ata
Safeguard Categories
Environment C
Involuntary Resettlement C
Indigenous Peoples C
Summary of Environmental and Social Aspects
Environmental Aspects The Project is classified as environmental category C based on site visits and assessment under the project preparatory TA. No land acquisition or resettlement was required for the SSB since its construction was done on a suitable existing vacant real estate owned by the State Tax Service. Site visits were made to the regional tax offices to examine the civil works requirements for the installation of ICT equipment. All construction, rehabilitation, and installation activities will be carried out within the premises of existing STS properties. During construction work, some minor noise and dust pollution will occur. The civil works contracts will include mitigating measures to minimize such pollution. Therefore, the Project's environmental impact is minimal and can be kept at acceptable levels.
Involuntary Resettlement No land acquisition or resettlement was required for the construction of the Special Services Building or will be required for repair works in tax offices.
Indigenous Peoples The project does not have any negative impact on indigenous peoples.
Stakeholder Communication, Participation, and Consultation
During Project Design Reforming tax policy and tax administration was a key part of the Government's Country Development Strategy (CDS) for 2006-2010. In the area of tax policy, the Tax Code is the key measure.
During Project Implementation The Government and STS established a Project Steering Committee to consult with relevant Government agencies and private sector stakeholders. The Steering Committee has had 8 meetings during project implementation. ADB review missions regularly consulted with relevant stakeholders, such as taxpayers, business associations, international organizations and the Chamber of Tax Consultants.
Business Opportunities
Consulting Services The Project will finance international and national consulting services for project implementation. The terms of reference for the consulting services include systems analysis and design, systems development and integration, systems implementation, and project management. About 32 person-months of international and 45 person-months of national consultancy will be required. The consultants will be engaged as individuals in accordance with ADB's Guidelines on the Use of Consultants. Advance recruitment of consultants will be undertaken in accordance with ADB's Guidelines on the Use of Consultants.
Procurement The Project Management Office will be responsible for procurement of all equipment, services, and civil works. All services, supplies and equipment to be financed by ADB will be procured in accordance with ADB's Procurement Guidelines.
Responsible ADB Officer Barreto, Ruben B.
Responsible ADB Department Central and West Asia Department
Responsible ADB Division Public Management, Financial Sector and Trade Division, CWRD
Executing Agencies
Prime Minister's Office
58 Erkindik Street, Bishkek City
720874, Kyrgyz Republic
Concept Clearance 12 Sep 2005
Fact Finding 17 Oct 2006 to 25 Oct 2006
MRM 08 Dec 2006
Approval 14 Jun 2007
Last Review Mission -
PDS Creation Date 22 Apr 2008
Last PDS Update 20 Mar 2014

Grant 0077-KGZ

Approval Signing Date Effectivity Date Closing
Original Revised Actual
14 Jun 2007 07 Aug 2007 20 Nov 2007 30 Sep 2012 30 Sep 2013 21 Jan 2014
Financing Plan Grant Utilization
Total (Amount in US$ million) Date ADB Others Net Percentage
Project Cost 12.50 Cumulative Contract Awards
ADB 10.00 14 Jun 2007 9.38 0.00 94%
Counterpart 2.50 Cumulative Disbursements
Cofinancing 0.00 14 Jun 2007 9.38 0.00 94%
Status of Covenants
Category Sector Safeguards Social Financial Economic Others
Rating - - - - - Satisfactory

Project Data Sheets (PDS) contain summary information on the project or program. Because the PDS is a work in progress, some information may not be included in its initial version but will be added as it becomes available. Information about proposed projects is tentative and indicative.

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Safeguard Documents See also: Safeguards

Safeguard documents provided at the time of project/facility approval may also be found in the list of linked documents provided with the Report and Recommendation of the President.

None currently available.

Evaluation Documents See also: Independent Evaluation

Title Document Type Document Date
Kyrgyz Republic: Tax Administration Reform and Modernization Project Validations of Project Completion Reports Nov 2015

The Access to Information Policy (AIP) establishes the disclosure requirements for documents and information ADB produces or requires to be produced in its operations to facilitate stakeholder participation in ADB's decision-making. For more information, refer to the Safeguard Policy Statement, Operations Manual F1, and Operations Manual L3.

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