Announcement of World Bank Supports Improvement of Argentina’s Tax Collection on January 26, 1989

FOR IMMEDIATE RELEASE World Bank 1818 H Street, N.W., Washington, D.C. 20433, U.S.A. * Telephone: (202) 477-1234 BANK NEWS RELEASE NO. 89/26 Contact: Ciro Gamarra (202) 473-8721 WORLD BANK SUPPORTS IMPROVEMENT OF ARGENTINA'S TAX COLLECTION WASHINGTON, January 26, 1989 -- Argentina's efforts to improve its tax collection system will be supported by a $6.5 million loan from the World Bank. The loan will help finance a technical assistance project aimed at improving the efficiency of the country's Directorate of Tax Administration (DGI). The project is expected to improve tax collection, reduce tax evasion, and discourage fraud. Authorities expect the improvements to lead to increases in collection of value-added, income and capital taxes amounting to as much as one- half of 1 percent of gross domestic product (GDP) in 1989. Falling tax revenues are at the root of much of the recent instability in Argentina's fiscal accounts and have contributed to the worsening of the country's macroeconomic performance. Tax revenues fell from a peak of more than 23 percent of GDP in 1980 to an estimated 21 percent in 1988. The project includes the development of a computerized-system to monitor Argentina's 2,000 largest taxpayers and the recruitment and training of personnel to improve DGI's capacity for tax inspection. The project also includes improvements in DGI's internal auditing procedures and techniques for inspection of taxpayers. The total cost of the project is estimated at $10.7 million, with the government providing the balance of $4.2 million. The World Bank loan is expected to be disbursed over three years. Under a technical assistance loan, approved in September 1986, the World Bank provided $2.2 million to support the medium-term restructuring of DGI, with a program encompassing changes in the organization's structure, modernization of its operations and development of advanced techniques of tax control and auditing. The $6.5 million loan will provide financing for a program to bridge the gap between DGI structural reform and the need to reverse the recent fall in tax revenues. The World Bank loan to the Republic of Argentina is for 15 years, including five years of grace, with a variable interest rate, currently 7.65 percent, linked to the cost of the Bank's borrowings. It also carries an annual commitment charge of 0.75 percent on the undisbursed balances. NOTE: Money figures are expressed in U.S. dollar equivalents.