Announcements of Making Taxes Less Taxing in China and Environmentally Safe Power in Thailand

The World Bank East Asia & Pacific Region 1818 H Street, NW Washington, DC 20433. USA Press Release no. 95/37 EAP Contact: Rachel McColgan-Mohamed (202) 458-0358 fax (202) 522-3405 Making taxes less taxing in China Washington, April 28, 1995- Taxpayers in China are set to get a break in the form of a simplified, more equitable system of taxes as reform of China's fiscal institutions and practices continues with the assistance of the World Bank Group. A loan for $50 million for the Fiscal Technical Assistance Project, approved earlier this week by the Bank's Executive Board, will help one of the most dynamic economies in the world-which has registered a growth in GDP at almost 10 percent a year for the past 6 years-overhaul the complicated tax practices that have not kept pace with the reforms in the rest of the economy. China's fiscal system has been under strain since the program of economic reforms began in 1978. A shift in the tax base resulted in the share of tax as a percentage of government revenues in GNP dropping from over 34 percent in 1978 to less than 16 percent in 1993. Until a year ago, the tax structure was complex, with 33 taxes, a multitude of rates in many taxes, and enterprise income taxes that varied by ownership and carried high marginal rates. Tax contracting between government and state-owned enterprises further exacerbated the stability of tax revenues. Recent fiscal reforms aim to radically change this dismal situation. The project would support the implementation of these and the preparation of future reforms by: >developing and implementing a new national tax administration; >improving capacity for tax policy analysis; >developing and implementing a central-provincial grants scheme; and >improving budgetary processes and practices. The project would increase the productivity of the tax administration, contribute to improvements in the management of public resources, and promote more equitable distribution of fiscal resources among provinces. The project would finance consultancies, training, studies, and equipment at the central and provincial levels. * Tax Administration- This component would support the development of a national tax administration capable of implementing current and future tax reforms. It would support consultancies for tax administration procedures and information systems, training, and equipment and software for the information system. As with most projects in China, the development of a new tax administration would be piloted in four cities which, after evaluation, would be expanded to 18 cities; Archives/Records Center, H B1-OO1 ( 1) * Tax Policy Analysis- Project Costs improving the tax policy analysis 5% capacity of the Government s% would be assisted by the gradual 0 Intergovernmental transfer of this function from the Fiscal Relations State Administration of Taxation El Tax Administration to the Ministry of Finance, and by ........ Tax. Pcreating tax policy analysis I Tax Policy Analysis capacity at the provincial levels. . Budget System Design of databases to undertake 86% analysis, together with the provision of requisite hardware and software; training and studies Total Cost - $105.5 mn; Bank Group loan - $51.1 mn will be the main tools for improving analysis capacity; * Intergovernmental Fiscal Relations- This component would focus on providing an efficient and equitable central-provincial grants scheme. This would develop a detailed grants scheme design, and administrative procedures and an information system for its implementation; * Budget System- This would increase the Ministry of Finance's capacity to administer the Budget Law and prepare a reform strategy for the budget system through the improvement of budget accounting and audit, treasury management, and budget analysis and implementation. Studies, consultancies and study tours will be the main means of achieving this objective. "By strengthening the fiscal sector, the banks and state-owned enterprises are relieved from the burden of governmentffunctions, allowing them to get down to real businesss, " said Bert Hofman, Task Manager for the project "In addition, a more efficient tax structure makes it easier for the taxpayer to pay his taxes. " The US$50 million loan is made up of $25 million equivalent with 20 years' maturity, including 5 years of grace, at the Bank's standard variable interest rate, and $25 million equivalent on standard International Development Association (the Bank's concessional lending arm) terms with 35 years' maturity. 2 FOR IMEIAT EE The World Bank East Asia & Pacific Region 1818 H Street, NW Washington, DC 20433. USA Press Release no. 95/38 EAP Contact: Rachel McColgan-Mohamed (202) 458-0358 fax (202) 522-3405 WORLD BANK HELPS GENERATE ENVIRONMENTALLY SAFE POWER IN THAILAND Washington, May 9, 1995- Thailand will generate urgently needed power to sustain economic growth through the Lam Takhong Pump Storage Project, an environmentally-conscious power project that would generate peak-time power using off-peak electricity. The World Bank announced today it is financing US $100 million of the US $585.6 million project. Since the late 1980s, Thailand has registered one of the highest rates of economic growth in the region. Although GDP growth has slowed from 12 percent a year to a still impressive 8 percent a year, the demand for power continues to outstrip supply and is set to increase at 9.5 percent a year over the next five years. To meet this demand, Thailand would have to add over 1,000 megawatts of new generating capacity each year over the next decade. Thailand has limited resources of its own to fuel power generation: natural gas resources are fully committed, use of lignite poses serious environmental problems, and hydropower development has been limited (less than a quarter of the potential power generation capacity has been harnessed to date) due to environmental concerns. Most of the growth in energy consumption is accounted for by the commercial sector. Yet the poorer people, who are predominately rural, continue to use substantial resources in the form of fuelwood as their main source of energy. Load Forecast 1993-2003 25000 160000 200 140000 2000010 .-' 120ooo 15000 -100000 S , 80000 - 00 60000 5000 - 0 a0 19889 93 1998 2003 Thailand Power IWorld Bank Archives/Records Center, H 81-001 ( 1) Three institutions govern the generation, transmission and distribution of power. The Electricity Generating Authority of Thailand (EGAT) generates and transmits power. The Metropolitan Electricity Authority (MEA) and the Provincial Electricity Authority (PEA) are the two agencies responsible for distribution in the Bangkok metropolitan area and the rest of the country respectively. In 1992, the Government approved a plan for deregulation, restructuring, and privatization of these public institutions. The project aims to increase EGAT's efficiency and to increase capacity by purchasing power from alternative sources and selling it on to MEA and PEA. The plan is well under way and is expected to be completed by 1998. The Thai Government has taken serious steps to promote energy conservation and protect the environment. The Energy Conservation Promotion Act was established in 1992, vesting authority in a number of agencies to enforce programs that foster efficient use of energy. At the same time, the Government revised its National Environmental Act to strengthen the public's rights to be informed and to participate in environmental matters, while reinforcing its mandate to promote pollution control, improve fuel quality, and to strengthen environmental monitoring capacity. World Bank Task Manager Darayes Mehta has summed up the project by saying: "We are essentially recycling water using an existing reservoir and building an additional one upstream. By pumping water from one to the other at off-peak periods, we can generate power to satisfy peak- period demand There will be no consumption ofwater." The project has three main objectives: (a) to assist EGAT to meet the system's peak power demand from the year 2000 at least cost; (b) to strengthen the environmental capabilities of EGAT; and (c) to assist the Government in setting bulk supply tariffs for distribution of power to the municipal and provincial power authorities. These will be achieved through the construction of: * An upstream reservoir of 10 MCM capacity; * Water conduit systems - tunnels and pen stocks - for the above; * An underground powerhouse; * An outdoor switchyard and 2 x 230 KV transmission lines of about 15 km long; * Consulting services for design and construction and supervision; * Environmental impact mitigation and rehabilitation of affected people; * Training and hardware to strengthen EGAT's capacity to manage and monitor the environment; * A consulting study to rationalize the cost of supplying power. The Overseas Economic Cooperation Fund of Japan is co-financing a further US $184 million for the project. The loan is repayable over 17 years, including five years of grace, at the Bank's standard variable interest rate. Thailand Power/World Bank 2