Argentina - Second Tax Administration Project

Documentof AlA 3Y/6o 0 - The World Bank FOR OFIMCIAL USE ONLY MICROFICHE COPY Report No. 10206-AR Type: (SAR) MEJIA, L / X37783 / I 4163/ LATPS ReportNo.10206-AR STAFF APPRAISAL REPORT ARGENTINA SECOND TAX ADMINISTRATION PROJECT MARCH 10, i992 Public Sector Management Division Technical Department Latin America and the Caribbean Regional Office This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  CURRENCY EQUIVALENTS Currency Unit: Peso ($) US$ 1 = $ 1 (January 1, 1992) WEIGHTS AND MEASURES Metric System i meter (m.) = 3.28 feet (ft.) i kilometer (km.) = 0.62 mile (mi.) i square kilometer (km2) = 0.386 square mile (sq. mi.) I metric ton (m. ton) = 1.1 US short ton (sh. ton) 1 liter (1.) = 0.264178 US gallon (gal.) FISCAL YEAR January 1 - December 31 ABBREVIATIONS AND ACRONYMS CUIT - Unique Taxpayer Identification Number DGI - General Tax Directorate PIU - Project Implementation Unit PSRL - Public Sector Reform Loan PSRTAL - Public Sector Reform Technical Assistance Loan AEDGI - Asociaci6n de Empleados de la Direcci6n General Impositiva ANA - Administraci6n Nacional de Aduanas  . i - FOR OMCIAL USE ONLY ARIENlNA SECOND TAX SR PROJEC &rAFF APAIA REZOR Table of Contet Page No. LOAN AND PROJECT SUMMARY I. iE SECTIR A. The Macroeconomic Environment 1 B. Revenues and Tax Administration 3 C. Previous Bank Lending Experience 11 D. Lessons Learned 12 E. Rationale for Bank Involvement 13 II. THE, PROJECT A. Project Objectives 13 B. Project Description 14 C. Project Cost and Financing 19 D. Cost Effectiveness Analysis 22 E. Project Benefits and Risks 23 HI. PROJECT IMPLEMENTATION A. Agencies Involved 24 B. Project Execution 24 C. Procurement 24 D. Disbursement and Special Account 28 E. Accounting and Audits 28 F. Project Monitoring 28 IV. AGREEMENTS REACHED AND RECOMMENDATIONS 29 This report is based on the findings of an appraisal mission in December 1991 comprised of Messrs. Mejfa (Mission Leader), Shahid Chaudhry and Gary Reid (LATPS). Messrs. Luca Barbone (EM4CO), Michael Stevens (CECPS) and Claudio Fernandez (AS2IE) acted as Peer Reviewers. The Department Director and Sector Division Chief were Messrs. Ping-Cheung Loh and Shahid Chaudhry, respectively. d IThis documenit has a restricted distribution and may be used by recipients only in the perforrnance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  ANNEXES 1 The General Tax Directorate 2 Existing and Proposed Equipment at DGI 3 Project Costs by Component 4 Cost Effectiveness Model 5 Key Project Activities and Schedule 6 Project Implementation Unit 7 Project Performance Indicators Documents in Project File Presidential Decree 1237, June 26, 1991 Collective Work Agreement Project Preparation Facilitl Action Plan Project Execution Document Cross-component Training Plan  - Hi - ARGENTINA SECOND TAX ADMINISIRATION PROJECT LOAN AND PROJECT SUMMARY Borrower: Republic of Argentina Beneflary: General Tax Directorate (DGI), Ministry of Economy Amount: US$20.0 million equivalent Terms: Seventeen years, including a five-year grace period, with loan amortization based on level repayments of principal, at the Bank's standard variable interest rate. Pro}ect Obkcthves: The project objectives are to simplify the legal framework for tax administration and strengthen the administration and collection of DGI to: (a) obtain sustainable revenue increases, and (b) to facilitate voluntary compliance through an improved perception of fairness and equitabie distribution of the tax burden in the population. Descptin: The project will finance consulting services, training, otfice refurbishing, equipment and software required by the General Tax Directorate (DGI) to: (a) review and codify procedural tax laws and regulations tc simplify and make coherent existing legislation, develop a legislative database (hardware and software) and train DGI legal staff (2 l'eicent of total costs); (b) expand automated accounting, personnel and othei administrative systems developed through 3015-AR in all DGI agencies nationwide, acquire microcomputers and train staff in their use (18 percent of total costs); (c) carry out taxpayer surveys, implement manual and automated systems and train staff to improve the taxpayer services offered by the DGI (6 percent of total costs); (d) install in all agencies the new au:omated collection systems for Large and Small Taxpayers developed through 3015- AR, acquire equipment, train staff and refurbish DGI offices nationwide (64 percent of total costs); (e) collect internal and external information, deveiop methodologies and automated tools for fraud detection and train taxpayer auditors in their use (4 percent if total costs); and (f) project administration and auditing (6 percent of total costs). The project consists of five components aimed at improving: (a) the Legal Framework; (b) Administration; (c) Taxpayer Services; (d) Collection Systems; and (e) Taxpayer Auditing. Benefits: A decrease in detected tax fraud and an increase in voluntary compliance would result in increased collections, conservately estimated at better than US$17S million per year. A more efficient DGI would operate in a more modern manner. A transparent and efficient application of simplified laws and regulations would contribute to a better perception of a more just and equitable distribution of the tax administration burden to all taxpayers.  - iv - proJect Risks: The major risks to project implementation are possible changes in leadership leading to changes in project strategy, and overloading the capacity of the organization to accept change. To reduce these risks: (a) the Government would maintain the composition of the Project Implementation Unit for the life of the project to ensure continuity and (b) d.isruptions to existing functions will be minimized by introducing new technology only after they are fully tested, through the development of pilots in selected agencies, and their subsequent extension to all agencies. Ftimaed Prolect Cost: Lc Foreign ThW - (US$ '000) - I. Legal Framework 524 120 644 I. Administration 2,427 3,130 5,557 HI. Taxpayer Services 1,596 50 1,646 IV. Collections 10,138 9,050 19,188 V. Taxpayer Auditing 705 560 1,265 Project Implementation Unit LQ 50 1,0 Total Project Costs 17,040 12,960 30,000 (of which PPF Refinancing) (838) (662) (1,500) Finanng Plan Local Foreign Total - (US$ '000)- Government 9,050 950 10,000 IBRD 7,279 12.210 20,00 Total 16,840 13,160 30,000 Estimated Disbursement FY92L FY93 FY-94 FY9S FY96 (in USS million) Annual 1.5 7.5 6.1 3.3 1.6 Cumulative 1.5 9.0 15.1 18.4 20.0  I. THE SECTOR A. THE MACROECONOMIC ENIRONM 1.1 In the last 60 years, the Argentine public sector became increasingly involved in resource allocation activities. This economic strategy was initially successful; however, by the mid-1950s terms of trade had turned sharply against agriculture, domestic import-substitution possibilities had disappeared, and balance of payments crises became frequent. Economic conditions deteriorated and economic growth became erratic; by the 1980s, real economic growth averaged a negative 0.78 percent for the decade (see Figure 1.1). The inflation rate also fluctuated disconcertingly over this period, averaging 710 percent annually; the 'Tax Policy for Stabilization and Ewnomic Recovery Report"M- estimated the loss of tax revenues due to the Oliveira-Tanzi effect at over one percent of GDP during the 1980s and about two percent of GDP in 1988 (see Figure 1.2). At the same time, increased government spending and continued expansion of the public sector led to burgeoning fiscal deficits (3.1 percent of GDP in 1980, 4.5 percent in 1990). 1.2 The importance of the public sector accounts in determining Argentina's macroeconomic perfotmance is due to its pervasiveness across economic activities. Total expenditures of central government were equivalent to about a third of GDP in 1987, although its sphere of action extended further throughout many economic sectors through the public enterprise system. The public sector has been prone to budget deficits, financed in large portion through the domestic financial system, which, together with rigid price, credit and interest rate controls, further repressed and distorted economic development. The tax system was unable to provide an increase in revenues corresponding to the increase in expenditures, in part because of inflation and in part because of the deterioration of the administration. Despite a number of reform initiatives, this erosion of revenues generally continued until 1989. 1.3 In November 1989, four months Argentine Rea I Economic Gowth by Year after taking office, the Menem administration introduced its first program aimed at stabilizing the economy. The program concentrated on i fiscal performance and structural reforms; it failed to reassure the financial markets which had experienced . previous failed programs (e.g., the "Plan Austral" and the "Plan Primavera"), and X - this program too failed quickly. Starting in December 1989, a number of ,_ ___ measures were introduced, which nsa 4,,, i,,, ,6 _m .6 4i8 in06 however, failed to be supported by fiscal adjustments to reduce the public sector r demand for credit and to eliminate igure I.1 money creation; the economy quickly entered into hyperinflation in February 1990. I/ World Ban, 19  -2 - 1.4 In March 1990, a new program of expenditure and revenue measures and structural refornmb was introduced, including a reduction in public sector employment and a limit to the interventions of the Cc-irtral Bank, the National Housing Bank and the National Development Bank; privatization of teiecommunications, roads, airlines, and others; and tightened monetary policy. Fiscal accounts improved substantially, public confidence grew, and monthly inflation decreased from 70-80 percent in the first quarter to 4-6 percent in the fourth quarter of 1990. However, fiscal performance began to flatten at the end of the year; public sector expenses increased, while improvement on revenues was slow. Monetary performance weakened as well, and in December the exchange rate suddenly devalued and inflation jumped to almost 9 percent in January 1991; the combined price index rose by 32.4 percent in February. The economy this time did not cpin into hyperinflation, due in great part to the greater fiscal efforts of the Government and the success of the structural reforms carried out. 1.5 The February 1991 fiscal package was designed to raise the fiscal balance and open the economy further; as a result, the financial markets calmed and the exchange rate stabilized. In April, the Law of Convertibility was passed, fixing the exchange rate to the US dollar (A 10,000 per US$), facilitating the use of the dollar in contracts, guaranteeing full convertibility, and decreeing that any changes in the value of the austral would require action by Congress. In January 1992, the currency was changed to the peso, at parity with the US dollar. This program reduced inflation to 2 percent in June, interest rates fell, consumer spending rose, and a modest economic recovery was fueled. DGI Col lect ions Versus Inflation QV W.or Ttx, 19B0-1990 0 0.5 0,045- 0.04- 0.035 0.0* 0 '0.025 &0.023 0.015 0.01 0.005 77.0 99.4 1107.7 127.4 204.0 35T2.4 389.8 599.1 680.4 195D.4 3205.4 Annul* Inflation Rate Figure 1.2: + Value Added O Income A Excise x Capital v Excise on Fuels 1.6 The economic situation is still fragile, however, and highly susceptible to shifts against the austral and to inflation. A strong performance in public sector accounts is essential to ensure that the measures taken mature into sustainable policies. The Government has taken transitory measures, such as emergency taxes (e.g., bank debits), expenditure reductions (e.g., arrears to suppliers), and the sale of assets (e.g., oil reserves) and concessions in airlines, railways, and telecommunications, among others; these sales have produced some US$600 million in cash and reduced the Government's external commercial debt by over (JS$ 7 billion. However, sustainable long-term policies are needed  -3 - to reduce the public sector deficit; continued public sector structural reforms are central to any medium-term scenario of sustained growth, and the Government has embarked on a far-reaching set of such initiatives designed to make the fiscal balance sustainable and the revenue and expenditure activities efficient. A number of constructive deregulation measures were taken in October 1991. The erosion of the Government's capacity to perform its core functions is addressed through an administrative reform and a strengthening of its budgetary capacity; the administrative reform seeks to reverse the deterioration in the quality and organization of the civil service, reduce the size of the federal bureaucracy and improve the incentive system for federal employees, among others. Budgetary strengthening would be carried out through the implementation of the Law of Financial Management and Performance Control, which defines financial responsibilities in Government and a modern control and auditing framework. 1.7 The Bank has supported the Government's efforts through a number of loans, in particular: the Public Enterprise Reform Adjustment Loan (PERAL, 3291-AR) and its Execution Loan (PEREL, 3292-AR), which will help reduce govermnent expenses through the privatization of selected public enterprises and the improvement of efficiency and service quality of others; the Provincial Development Loan (PDL, 3280-AR), which would finance provincial efforts to enhance revenues and control expenditures; the Public Sector Reform Loan (PSRL, 3394-AR), aimed at centsal government expenditure rationalization, closing tax loopholes and revenue enhancement; the Public Sector Management Technical Assistance Loan (PSMTAL, 2712-AR), whose objective was the improvement of the Government's economic management; and the First Tax Administration Praject (TATAL, 3015-AR), which addressed short-term tax administration needs. Other Bank loans address specific agencies, aimed at strengthening the Government's capability to carry out planned reforms: in particular, the Public Sector Reform Technical Assistance Loan (PSRTAL, 3362-AR) is aimed at strengthening of Customs, among others, and the proposed project is aimed at strengthening the tax administration agency, DGI. B. REVENUES AND TAX ADMINISTRATION 1.8 Several agencies are charged with collecting national taxes: the General Tax Directorate (DGI), the Social Security Administration, the National Customs Administration (ANA), and other minor bodies. The DGI is the most important of these agencies, both in revenue collected and with respect to its auditing and prosecuting powers. It operates over the entire national territory and its main functions are the assessment of tax liabilities and the collection of revenues (see Annex 1: The General Tax Directorate). In 1990, DGI collected 58 percent of national revenues, Social Security 29 percent, and Customs 13 percent (see Figure I.3). 1.9 The Government, with Bank support, embarked on a series of efforts to increase the efficiency of its revenue collection agencies. The modernization and computerization of Customs is addressed primarily through the PSRTAL (3362-AR). A loan is being prepared for the rationalization of the finances of Social Security. DGI's organization was revised and a unified taxpayer identification number implemented through the PSMTAL (2712-AR). Under the first Tax Administration Loan (3015-AR, approved in December 1988), 600 taxpayer auditors were hired, DGI personnel received training, a new computerized collection system for large taxpayers was developed and is being introduced in the 37 largest DGI agencies (it is operational in 17 to date); an automated collection system for other taxpayers is being developed and will be tested at headquarters; administrative and monitoring systems are being developed for use at headquarters. The proposed project would, among others, expand the systems developed in all DGI agencies nationwide.  -4 - ARGENTINA: MONTHLY TAX RECEIPTS 2.2 2 f1~~1. * ~~1.4 *~~~~~~~~aur 1991 un619 * 1, 0 I C 7 0.8a .0 ~ ~ . C - ~~0.2 .Jan-SB Jul-88 Jan-89 Jul-8B Jan-GO Jul-G0 Jan-91 January 1999 June, 1991 001I ANA Msocial security gue1.3 1.10 Tax 6perations until late 1989 were chaotic and reflexive instead of intentional and remedial. Sporadic attempts to compensate for public revenue shortfalls by changing the tax laws created an unstable legal framework which resulted in an unmanageable and essentially inequitable tax system that prompted both vested interest lobbying to change the laws and public cynicism and defiance expressed in high levels of tax evasion. The constant battle with inflation induced a short-term approach to the administration of tax collection, with little attention to accuracy of compliance or implementation of remedies needed to produce an efficient tax administration in the long term. The excessive fragmentation of the tax system, variability in legislation, and the complex, confused and at times contradictory procedural laws and regulations produced a legal framework of very difficult application. Table I.1: Tax Base Rzvenue Sha, 1980-90 1.11 In 1991, the DGI was in charge of collecting over 20 separate taxes from a total of 2,453,000 taxpayers for Tax Base Percont Cotlection which it tracked collections in 47 separate accounts. The five largest taxes accounted for more than 80 percent of Calbetibdes 17 DGI's revenues on average over the 1 1-year period Excises 14 embracing 1980-1990 (see Table I. 1). Collections declined, Incan 12 Capi tat 6 both in absolute terms and as a percentage of GDP, in Bank Debits 3 particular the broad-based taxes; the VAT experienced the Stani 2 Foreign Exchange I largest annual decline, amounting to 0.33 percent of GDP others 14 per year or approximately 11 percent of average value- added tax collections over the decade. Overall annual tax revenue declines amounted to almost 0.5 percent of GDP or roughly 5 percent of average annual DGI collections during the 1980s. VAT and income tax became  riddled with exemptions and inappropriately applied definitions of inflation adjustments; abuses of industrial promotion incentives increasod; this led the Government to rely excessively on more narrowly based, more sable and easiek -- apply taxes, such as export and energy taxes. Tax Reform In the 80s and 90s 1.12 Tax reform was an integral part of the Elan Austral in 1985-86. The anti-evasion powers of DGI were increased, VAT rates were unified at 18 percent and a simplified system for small taxpayers introduced. Direct taxes were strengthened, including several changes to the income tax, a modification to the infl.tion adjustment method, a strengthening of the tax on capital and net wealth, a .eduction in the taxable minimum and the inclusion of shares in the base for the personal wealth tax with credit given for the taxes paid by the enterprise. On the whole, the reform was not successful. Th fragmentation of the tax system was not reduced, and revenues continued to erode due to the industrial incentives system. Indeed, the system for inflation indexation contributed substantially to a further reduction of the tax liability of corporations. 1.13 A number of ad hoc measures were adopted by the Government to remediate the deterioration of iiscal revenues. In March 1988 bank cheques were taxed for the first time; later that year, surcharges on gasoline, fuels and telephone were introduced; selected excises were increased. In December 1988, the open-ended tax exemption given to promoted firms was abolished. 1.14 In December 1989, the Government began to take steps to refocus its efforts towards broad- based taxes, to distribute more equitably the burden of taxes and to regain taxpayer respect for its tax policies, and beginning in December 1989 a number of steps were taken towards the creation of a simpler and more stable tax system: (a) the value-added tax base was widened to nearly all goods and some discretion was given to the President to increase rates; (b) income taxes on corporations were simplified and lowered from 33 to 20 percent with a minimum tax payment of 1 percent of assets; (c) income tax for individuals was simplified and a new set of brackets introduced; and (d) an intensive audit of current beneficiaries of the industrial promotions program was ordered. 1.15 In February 1990, inflation adjustments were redefined virtually to eliminate the Tanzi effect, and a decision was taken to avoid using the tax system to provide promotional incentives to industry, which had been extensively abused and which were estimated to have cost over US$1.6 billion in 1989. .'e VAT was extended to the agricultural sector and later to all services (effective in October), and X - and income-tax payments were required to be paid within ten days, to reduce the collection lag and further reduce inflation costs. A law was enacted imposing stringent penalties (including incarceration) for tax evasion. In February 1991, a new set of reforms was introduced, and the VAT, asset, bank cheque and gasoline taxes were raised and the income tax base was widened. These final changes in substanive law paved the way for a set of reforms aimed at increasing the efficiency of the tax administration system and increasing voluntary taxpayer compliance, by addressing weaknesses in the tax administration legal framework (josedural law and regulations), in the system's institutional infrastructure, and the taxpayer environment. As a result of these and other measures, public finances are now roughly in balance (see Table 1.2). 1.16 At present, two initiatives by the Government are being evaluated. The first is the improvement of social security collections through the implementation of a primary surplus tax; employers' contributions to the social security wage tax, now at 16 percent, would be replaced with a supplemental tax, defined as VAT plus VAT on exports, minus the wage bill and employee social insurance payments, minus taxes paid on assets income. This tax would be collected by DGI and distributed as follows: 70 percent to the social security system, 20 percent to military pensions, and 10 percent to the provinces in accordance with their social security obligations. The net benefit of the primary surplus tax has been estimated at about US$ 900 million per year after 1992.  -6 . 1.17 The second initiative is the replacement of the present income tax with a tax on distributed profits. Individuals would be subject to tax if they (a) conduct a business or other activity carried on for profit, or (b) if they receive an income from a foreign source. Only wages above US$2000 per month would be included, with social security and pension funds deductible from the taxable base. This tax would be simpler to administer than the existing income tax, and encourage investment as non-distributed profits would be exempted under the new regime; it would on the other hand involve a decline in revenues of about US$600 million per year. Table I.2: Public Finances (in percent of GDP) July 1991 - Est. Juno 1992 198 129 199 IMF Prog. Tax Re'enueo 12.7 132 19.9 21.0 Primazy balance nonftnamial public sector -0.3 2.2 2.3 3.5 Nonfinancial public ector overall balance -15.9 -2.3 -0.7 0.5 Operating losses of Central Bank -5.9 -1.0 -0.5 -0.4 Combined oveall balance of the public sector -21.7 -3.3 -1.2 0.1 Industrial Promotion. 1.18 The industrial promotion regime has been an attempt by the Government to incentivate industry through various exemptions from taxes or deferment of tax payments, to promote sectoral, regional or priority projects and the investment and re-investment of profits. Loopholes in this regirmie cost the Gov.rnment US$1.6 billion in 1989, or 1.5 percent of GDP; this cost is estimated to increase to US$3.6 billion in 1994 if measures to control and improve this program are not adopted. 1.19 These m.easures, begun in 1989, take the form of changes in program definition and policy, and improvements in its monitoring. The most important of these are: a. The Emergency Law of 1989, which deferred 50 percent of industrial promotion benefits for one year beginning in August 1989 in exchange for a bond to be paid 24 months later. b. Transferral of authority for industrial promotion from the Provinces and Tierra del Fuego to the Federal Secretariat of Public Revenues (Decrees 435 of March 1990 and 612 of April 1990) - heretofore provinces had been in effect giving away federal revenues. c. Cancellation of all extant, not yet activated industrial promotion benefit contracts; rights to renew existing contracts were also cancelled. d. Improved monitoring (decree 1355 of August 1990); information on 2400 projects permitted an estimate of the fiscal cost of industrial promotion of approximately US$3.5 billion, substantially greater than the previously estimated cost of US$2.1 billion. e. Most recently, replacement of self-monitored, open-ended tax deductions with a limited tax bond program. Beneficiaries would be fully audited for compliance against the original contract; those passing would receive nontransferable fiscal bonds applicable to taxes that year and those failing would receive a smaller bond (in proportion to non-compliance) and would be audited for back taxes; and the evaluation of a regulation to induce a voluntary withdrawal from the industrial promotion system.  1.20 As a condition of the release of the second tranche of the PSRL (3394-AR), the Government has engaged itself to take measures to limit the fiscal cost of industrial promotion to less than 30 percent of projected fiscal cost without reform for 1994, as evidenced by : (i) having conipleted the tax bond program: (ii) suspended benefits to ineligible firms; and (iii) completed requisite decrees and resolutions to establish a legal basis for control; terminated special protection for the electronics industry in Tierra del Fuego; and enacted no new law on industrial promotion entailing additional fiscal costs to the Federal Treasury. 1.21 TATAL (3015-AR) collaterally addressed the improvement of monitoring of compliance with the Industrial Promotion Regime, through the improvement of DGI's auditing function. Financed by this loan, 600 taxpayer auditors were hired to complement existing DGI staff, and all taxpayer auditors trained; auditing techniques were reviewed and improved, and information from participating firms was obtained and processed. Further improvements to auditing techniques are needed, especially to use the new database of taxpayer information created using the automated collection systems developed through TATAL (3015-AR). This will be undertaken as a part of this proposed project. Tax Administration Leal Framework 1.22 Argentine experience demonstrates the importance of a stable legal policy framework. Frequent legislative changes and the imposition of new levies has greatly complicated DGI's work, and resulted in the accumulation of inconsistent bureaucratic processes resulting from repeated legislative "fixes" in response to revenue shortages. The nature and stability of the legal mandate imposed on DGI clearly constitutes an important constraint on its production function. 1.23 In Argentina, the tax administration's legal Table 1.3: Issued between 1986 and June 1991 framework has three parts: substantive law, procedural law (replacing to a large extent LAWS DECREES RESOLUTIONS regulations issued in other countries by the tax agency), and resolutions (interpretations of 1987 10 20 44 procedural law issued). The modifications which the 1988 11 26 16 Government has made to the existing substantive tax 1989 15 36 3 1990 7 53 33 laws, while on the right track, do not provide 1991/June 3 31 11 sufficient elements to grant success; the number of --- 196 -6- taxes and the definitions of tax bases, and, in some TOTAL 53 196 164 cases, the number of rates which apply to taxpayers in different categories, are susceptible to further simplification. It is expected that the increased collection efficiency obtained through this project will decrease Government reliance on inefficient taxes, which would make a revision of substantive law in the interests of efficiency and equity more feasible than now. To improve the efficiency of the administration, however, it will be necessary to address procedural law: the large number of laws, decrees, resolutions and regulations (see Table 1.3), intended to implement or clarify the legal framework has resulted in a situation of the utmost complexity, exemplified by a ruling in a case by a judge in the Argentine Courts in these terms: "... We ... are in an exceptional situation where our legal code is saturated with juridical norms of a hierarchy less than that of a Congressional Law, resolutions which sometimes contradict each other, which are born daily, are repealed, modified, etc., and that cannot evidently be known by the taxpayer, the ordinary citizen; worse, they are even unknown to [DGI experts] ...". The project would finance technical assistance to review procedural laws (and to a certain extent substantive laws) concerning tax administration and prepare a simplified set ("texto ordenado"). 1.24 The National Tax Department ("Direcci6n Nacional de Impuestos") reports, as do the DGI, the National Tax Court ("Tribunal Fiscal") and Customs, to the Secretariat of Public Revenues in the Ministry of Economy. It is in charge of formulating and initiating legislation and, therefore, is in close touch with the Legislative Power (Congress). In discharging these duties, it is not required to  -8 - consult with DGI, although at present there are no problems of communication. In the past, this division of labor has resulted in a definition of tax laws with little relation to their implementability, leading to their inconsistent application, long delays at the Fiscal Tribunal, and the promotion of recurrent amnesties to redress what is fundamentally a flaw in the regulatory environment. The consequences of this complex situation are reflected in the fact that almost 20 percent of DOI regulations enacted since 1986 have since been repealed (ref. Table I.4). The proposed project would finance technical assistance to review all DGI-issued resolutions and regulations and issue a unified set. Table I.4: DOI Rgulations year 1986 1987 1988 1989 1990 1991/June TOTAL ENACTED 71 124 165 153 183 98 794 REPEALED 18 25 31 23 25 - 122 IN FORCE 53 99 134 130 158 98 672 Tax Administration Institutional Infrastructure 1.25 Between 1986 and 1989, collected revenue per audit fell from US$126 to US$34, while the average cost per audit increased from US$278 to US$83Q. Qualified staff were difficult to attract and retain, morale was low and staff usually held more than one iob to compensate for low wages. For a long time, DGI management was unable to plan or carry out reforms to improve productivity. This was aggravated by very high turnover in the position of Director General of the DGI. Since 1989, however, many of the problems which plagued the institutional infrastructure of tax administration have been identified, and are being addressed, as explained below. 1.26 The DGI operates in an autarkic manner, giving it a certain independence from general public sector rules which allows it to offer somewhat more attractive working conditions than other government bodies. A new general organizational structure for DGI was approved by Presidential Decree of June 1991. This new classification is in line with modern managerial concepts (e.g., planning, operations and support), and should function well with minor lower-level modifications. Salaries and promotions are addressed by the new management-union contract ("Collective Work Agreement") being negotiated. Heretofore, a very flat compensation curve had been used, which together with high job security had reduced incentives to employees and made it very difficult for management to improve the quality of the work force. The new contract will: (a) introduce modern personnel management systems; (b) establish a new career growth plan; (c) modify the existing, excessively generous, leave policy; (d) introduce a single work schedule, thereby reducing the possibility of secondary jobs; (e) introduce a policy of promotion by merit through examination; (f) modify the discipline policy; and (g) raise salaries. 1.27 The new contract has been reviewed by the Bank and found to be satisfactory as an initial starting point for personnel management reform of the DGI. The implementation of the Collective Work Agreement will take place before the estimated date of effectiveness of the proposed loan. During the next two years, its implementation will bring to light modifications which will be required to the personnel system, due in large measure to the extensive introduction of technology through the project and its consequent modifications to existing functions, reward system and career paths. A review of the provisions of the Collective Work Agreement should therefore be carried out after the proposed reforms are sufficiently absorbed by DGI, to ensure that the DGI organization, structure, functions and personnel management procedures and systems are adequate and that they facilitate the continuity of the reforms and improvements obtained through the proposed project. Arrangements governing the execution of this review and its implementation were agreed at negotiations.  -9- 1.28 The deterioration of the quality and morale of DGI staff over the past decade has not yet been addressed; increased training and managerial attention to staff are required to improve the culture of the organization. In light of the Collective Agreement and to improve efficiency, staff functions and duties will be revised and supported by the introduction of automated and manual systems to replace existing obsolete administrative systems, such as personnel, purchasing, electronic mail and accounting. To emphasize staff accountability, well-defined monitoring systems will complement the administrative systems. Staff bonuses tied to increased collection awarded on a merit system will provide an incentive for better performance (see Annex 1). 1.29 The primary functions of DGI, that is, facilitating and monitoring taxpayer compliance and preventing taxpayer non-compliance, have until recently operated very deficiently. The tax roster was allowed to deteriorate, and the collection system was designed to operate centrally; data was col;cted on paper and inputted centrally, with a very high percentage of error. The various systems used over 2000 programs in old, difficult-to-modify languages, which made their modification cumbersome and information retrieval extremely slow. Taxpayer auditing through cross-checking with external sources was not possible, and detecting non-compliance difficult. 1.30 These problems were partially addressed beginning in 1987 with Bank assistance (Loans 2712- AR and 3015-AR). The tax roster is being reconstituted beginning with the largest 30,000 taxpayers; it requires extension to cover the entire taxpayer population. A new automated collection system, already operational in five agencies, has the potential to improve DGI's ability to collect and monitor collections, to maintain an updated tax roster and to carry out some computerized cross-checks for compliance, including with other data sources such as the social security system. This system must be installed in all DGI agencies, and generalized to the whole of the taxpaying population from its present limited scope (Large Taxpayers). 1.31 In the meantime, DGI has attempted to palliate the absence of efficient automated systems in all agencies for collection and taxpayer auditing through a number of localized initiatives, some of which have been quite successful. The LoterIVA, a lottery based on VAT receipts, has been well received, and has increased registration of transactions; legal modifications have allowed more flexibility in the application of fiscal secrecy, permittinb, the DGI to publish in the newspapers lists of defaulting taxpayers; this too has had an effect in curtailing fraud. 1.32 Finally, management also requires support. Lack of long-range planning has been an often noted deficiency of DGI; monitoring and decision-making have been very difficult because of the paucity of appropriate information available to management. The Analysis and Statistical Department must be strengthened through training and the use of modern technology, and management information systems introduced. National Tax Court 1.33 Taxpayers in Argentina can appeal a DGI tax or penalty determination by lodging a formal appeal with the National Tax Court. Decisions of this administrative tribunal can in turn be appealed to a National Court of Appeals, a civil court. Taxpayers almost automatically appeal DGI decisions to the National Tax Court, and collections of reassessed tax liabilities are usually delayed. The Tax Court employs about 140 people, 21 of whom are judges (9 specializing in Customs). The efficiency of the Tax Court is low, as attested by the fact that thM average waiting period for a case is around 3 years, that the Court is some 8 years in arrears, and that the number of pending cases increases by an average of 15 percent yearly. The perceived inefficiency of the Tax Court also plays a role in decreasing voluntary taxpayer compliance, as it presents an easy road to deferral or even elimination of payments. It is therefore necessary to strengthen the monitoring of DGI's proceedings at the National Tax Court as well as assist the Tax Court itself to make it more efficient. This is part of the proposed project.  - 10- Federal-Provincial Relationships 1.34 The latest Co-participation Law (1987), defined the rules for revenue sharing between the provinces and the central administration, increasing the provincial share to 57.5 percent and setting the limit to discretionary contributions from the Treasury at a maximum of I percent of GDP. Other aspects of the law dealt with the secondary distribution of resources. The law has not, however, resolved the Provinces' financial problems, as shared revenues declined, expenditures were not reduced, while provincial (non-shared) revenues did not increase. In addition to rationalization of expenditures, the provinces would benefit from a tax administration improvement effort similar (albeit smaller in scope) to the oine proposed for DGI. The systems introduced should be capable of adoption by the provinces (after suitable modification), and the experience garnered by DGI would permit a highly profitable transfer of technology from the central administration to the provinces. Efforts in this respect would be carried out under both the proposed project and the Provincial Development Project (3280-AR). Taxpayer Compliance 1.35 Numerous sociological and psychological studies of taxation have concluded that discouraging non-compliance is not the same as improving compliance. Taxpayer attitudes matter; they affect intentions and therefore behavior; they are in turn affected by the social context, the perceived fairness of the tax structure, its complexity and stability, how it is administered, the value attached to government activities, and the legitimacy of the government. A May 1991 surve' of taxpayers confirmed a common perception of lack of information on tax administration, unrair competition to tax-paying businesses by the underground economy, lack of enforcement, lack of motivation by DGI staff, too much emphasis on known taxpayers compared to unknown evaders, and the negative effect of the frequent amnesties granted by the Government. 1.36 Tax amnesties are transitory suspensions of procedural law provisions and the creation of alternative, temporary compliance rules. The frequency of the amnesties implies a cyclical and negative stimulus to voluntary compliance, as the taxpayer prefers in many cases to postpone paying taxes as much as possible in the expectation of a future amnesty. Argentina has granted 16 separate tax amnesties over the past 33 years, in the form of forgiveness, moratoria and ready compliance schemes'. In the last decade, the frequency of amnesties has increased. 1.37 Amnesties constitute a political admission of failure on the part of the administration. Increased DGI efficiency is necessary to avoid the need for future amnesties; increased information to the public is necessary to improve compliance and to introduce a sense of participation which was lacking on both sides; DGI efforts today give more emphasis to participation and cooperation (using as symbol the bloodhound), whereas previously it emphasized penalties and strength (using as symbol a tank). Finally, it is necessary to provide an adequate service to taxpayers to dispel the negative image that DGI has at present with respect to taxpayers. 1.38 Another aspect of the tax administration system which facilitates taxpayer compli ce is the expense and degree of difficulty involved in preparing tax forms. In this regard, the DGI carried out a considerable simplification in 1987; however, the number of tax forms, the frequency of their filing and the difficulty of preparing them is very high, and reducing their expense is one of the key performance indicators for the success of the proposed project. Z/ Amnestics cancel taxes and pcnalties due to evasion in exchange for a reduced 'compensatory" tax; moratoria are restricted to interest due and inflation adjustments of taxes in arrears; ready compliance gives more time to taxpayers and may reduce the inflationary adjustment of the amount due.  - 11 - DGI Current Strategy. 1.39 DGI's current strategy is aimed at eliminating four major outstanding problems which contribute to the inefficiency of the present tax administration system: (a) the multiplicity and frequent contradiction of procedural laws and regulations on tax administration; (b) weakness and excessive centralization of existing administrative systems and procedures; (c) poor service to the public, reinforcing a negative image of the institution; and (d) inefficiency in collections and taxpayer auditing. DGI's 1991-94 action program is geared toward a more effective definition of its legal framework and the medium-range improvement of the institution to maximize revenue through a more effective use of its human resources and the introduction of information technology. In addition to the specific tax administration technical developments, DGI's current strategy also concentrates on core public sector management problems like human resource management, procurement, technical capacity, budgeting, and accountability. These problems have been addressed by the Bank's PSRL (3394-AR) and also by the recent tax administration strengthening interver.tions (Loans 2712-AR and 3015-AR), on which the proposed operation will build. 1.40 The reforms introduced by the Government so far are expected to increase revenues by over one percent of GDP per year, because of improved tax policy and administration components. The Government would be able to get US$200 million in savings through the reduction of tax subsidies through the industrial promotion program. The proposed project is expected to increase the present value of average annual revenues further by a minimum of US$175 million per year by project completion, although less conservative estimates by DGI management put this increase at over US$600 million per year. Direct comparisons of revenue collected can not alone be an indicator of the efficiency of the tax administration, because of the influence of many exogenous factors, such as the economy itself, variations in the tax rates used, increase in voluntary compliance - itself due to many factors; it would be extremely difficult to measure separately the impact of each factor on collection. Therefore, in addition to this general indicator, more independent indicators of performance will be used, such as the number of identified taxpayers, the ratio of collections to DGI expenses, the cost to taxpayers of preparing returns, the distribution of taxes across population, the percentage of taxpayer accounts in arrears, the ratio of IVA and Income Tax Collections to Total Collections, and the perception of DGI performance by taxpayers (see Annex 7). C. PREVIOUS BANK LENDING EXPERIENCE 1.41 The Public Sector Management Technical Assistance Loan (PSMTAL, 2712-AR), which became effective in November 1986, had as its objective the improvement of the Government's economic management and the performance of selected public sector institutions. Taxes (policy and administration) was one of several components, and its objective was to modernize DGI by implementing a unified taxpayer identification number, developing software for collection and tax inspection audits, and creating a new organizational culture for tax administration. The unified taxpayer identification number was established - a first critical step in rationalizing the operational infrastructure of the tax system - an Information System for Relevant Economic Transactions was implemented, and an organizational reform carried out. The software for collection and tax inspection was designed but not developed, due to disagreements amnong DGI management, staff and the project coordination unit on the technical merits of the design, administrative delays in proceeding to bid the development, and changes in DGI senior management. Work on the subcomponent was stopped in September 1989 when a new administration in DGI decided to review and reformulate its institutional requirements. 1.42 At the same time, following a major Bank review of Government fiscal policies, the Government of Argentina and the Bank agreed on the need for additional support to DGI. The first  - 12 - Tax Administration Loan (TATAL, 3015-AR) was approved in January 1989; it focused on the short- term objective of rapidly increasing DGI's revenue mobilizing capabilities and is slated for completion in its major components in 1992. The project (US$6.5 million) had six components: (a) developing a computerized system for the "surveillance" of the 2,000 largest taxpayers; (b) increasing the number of tax inspectors and computer analysts and their training; (c) revising procedures and systems for internal auditing and control of DGI operations; (d) reviewing inspection techniques, especially computerized accounting systems; (e) acquiring single- and multi-user computers for the decentralization of DGI operations and the control of the 2,000 largest taxpayers. The IMF also provided technical assistance to the project. During the first year of project executien national elections resulted in a completely new administration. Partly as a consequence, there were changes in senior management, project activities carried out with little institutional direction and support, and the partial results obtained initially (the surveillance computerized system, hiring tax inspectors) were not followed up. 1.43 The PSRL (3394-AR) addressed tax administration directly, supporting: (a) the rebuilding of the tax rolls for the 30,000 largest taxpayers and later all taxpayers; (b) the improvement of taxpayer auditing, including 400,000 site inspections in 13 major cities; (c) improved internal management of DGI through revised procedures; (d) incentives for tax inspectors and an end to lifetime employment guarantees unrelated to perfcrmance; and (e) modernization of legal procedures to facilitate prosecution of tax evasion. The proposed project would assist in the implementation of these goals. 1.44 The latest DGI Director General was named in November 1989; ongoing discussion with the IMF and Bank eventually led to the definit.on of a basic strategy and by mid-1990 it was agreed that DGI should concentrate on the development of a Large Taxpayers Collection System, on the understanding that this system would be later generalized to all taxpayers; work was restarted on the procedures and systems for internal auditing and control and tax inspection techniques. The equipment component was redefined to conform with the new strategy. 1.45 The Large Taxpayer Collection System was completed in January 1991 and has been successfully implemented in four major agencies; its roster comprises the largest 2000 taxpayers in the country. The other components of 3015-AR are also underway. Training under the project for DGI is being provided by the University of Buenos Aires for the next two years. The internal audit component was designed and software development for 12 systems is ongoing. Tax inspection methodologies are being prepared for Industrial Promotion beneficiaries and for exports, agriculture, refrigeration, banking and finance, and oil sectors, as well as special software to assist in auditing computerized accounting systems (large multi-user computer versions). Finally, as planned, the Large Taxpayer Collection System is being modified to make it applicable to the universe of taxpayers. D. LESSONS LEARNED 1.46 Lessons from previous Bank Involvement in public sector management projects indicate that projects in this area need (a) strong commitment at all levels (political, managerial and technical); (b) a clear focus and limited scope; (c) detailed project preparation with small proportions of unallocated funds; (d) transparency in funding and selection of personnel during implementation; and (e) a sense of ownership of the project by agency staff. This project benefits from very strong commitment from the very highest political levels through DGI management and down to its staff. It has well defined goals and concentrates on only one agency, the DGI, with only 3 percent of project funding affecting other agencies (National Tax Directorate, National Tax Court and the Provincial Tax Authorities, and one study on Social Security); Project preparation is very detailed, and every project activity is being defined and activity performance measures determined for each one. DGI has decided to enter into a Management Service Agreement with UNDP/OPS to ensure transparency and efficiency in contracting and procurement. Finally, project sustainability is addressed specifically by the introduction of new  - 13 - functions, procedures and systems in all major areas of the organization and in all agencies, together with a training program which closely follows these modifications and is tied to the DGI incentive system, which itself it tied to the yearly increase in revenue collection (see Annex I). Furthermore, DGI has been successfully following a policy of using its own staff for project leadership and execution in addidon to consultants where needed, thus creating a sense of participation and ownership of the project. E. AUA F INVOLVEMENT 1.47 Supporting public sector reform is a fundamental Bank objective in Argentina. Previous Bank findings and re&immendationsk have underlined the need for an increase in revenues, a reduction in the complexity and lack of transparency of the system and the strengdening of the General Tax Directorate's internal technical ability through improved organization, data processing and better personnel procedures. The proposed project would strengthen the administrative and technical capabilities of the General Tax Directorate and complement activities carried out under the Bank's 1986 PSMTAL (2712-AR) and the 1988 TATAL (3015-AR). The proposed operation would consolidate, expand, and deepen key aspects of the previous technical assistance efforts to increase revenues and provide sustainability, while addressing the neglected issue of voluntary compliance, and in this way directly support of Government's reform program and the PSRL (3394-AR). 1.48 Continuous interaction between the Bank and the DGI since 1986 has modified the initial, marginal role of the Bank in Argentine Tax Administration and resulted in full Bank participation in the development of DGI's strategy. The Bank's participation would have a catalytic role in ensuring continuity of an essential institutional development effort, as well as in support of activities that fall outside DGI's jurisdiction, such as tax law sinplification and support of the Nati ,al Tax Cout. In addition, the procurement of the required computer hardware, software, and technical assistance for the new system is technically complex for DGI; thus DGI would benefit from the Bank's experience in carrying out similar procurement as well as by its use of transparent evaluation methodologies. II. THE PROJECT A. PROJECT 0BJECllVES 2.1 The proposed project aims to: (a) increase tax revenues without increasing tax rates by enhancing the efficiency of the tax administration system; (b) ensure the continuity and sustainabiity of the revenue increases; and (c) facilitate voluntary compliance through a perception of fairness and equitable distribution of the tax burden in the population. The project would address four major issues contributing to the inefficiency of the present tax administration system: (a) the multiplicity and frequent contradiction of procedural laws and regulations on tax administration; (b) weakness and excessive centralization of existing administrative systems and procedures; (c) poor service to the public, reinforcing a negative image of the institution; and (d) inefficiency in collectionand taxpayer auditing. 3/ World B&nl (1990) ArgaMiM: Tax Policy for Sabilizton and Economic Rwcovery (Wuhington) World Bank (1990 Arietina: Reform for Price Stability and Growth (Washington) WorMl Bak (1991) Tax Admintation As _smmnt in LAtin Ameica: Vols I & H (Washington) - drft  - 14 - B. PROJECT DESCUION 2.2 The project consists of five components aimed at improving: (a) the Legal Framework; (b) Administration; (c) Taxpayer Services; (d) Collection Systems; and (e) Taxpayer Auditing. The project will finance consulting services, training, office refurbishing, equipment (see Annex 2: Existing and Proposed Equipment at DGI) and software required by the DGI to: (a) review and codify procedural tax laws and regulations to simplify and make coherent existing legislation, develop a legislative database (hardware and software) and train DGI legal staff (2 percent of total costs); (b) expand automated accounting, personnel and other administrative systems developed through 3015-AR in all DGI agencies nationwide, acquire microcomputers and train staff in their use (18 percent of total costs); (c) carry out taxpayer surveys, implement manual and automated systems and train staff to improve the taxpayer services offered by the DGI (6 percent of total costs); (d) install in all agencies the new automated collection systems for Large and Small Taxpayers developed through 3015-AR, acquire equipment, train staff and refurbish DGI offices nationwide (64 percent of total costs); (e) collect internal and external information, develop methodologies and automated tools for fraud trend detection and train taxpayer auditors in their use (6 percent of total costs); and (f) project administration and auditing (6 percent of total costs). 1. L1gal Framework Improvements. 2.3 This component will finance consulting services for technical assistance, software systems design and implementation, acquisition of computers and training, to review existing tax procedures and prepare proposals for the simplification of the tax administration procedural legal framework, to ensure simpler, faster, more efficient and stable procedures. This effort would complement a recent Government initiative which reviewed and simplified all substantive tax laws. A major aspect of this review will be the evaluation of all DGI-produced regulations. 2.4 (a) Simglification of the Laws. Review of existing procedural laws and preparation of a simplified set ("texto ordenado"). Procedures will be simplified by, for example, establishing uniform procedural definitions for taxpayers and tax administration for all taxes; integrating compliance with several taxes; eliminating all legal situations that constitute procedural bottlenecks and resolving ambiguous legal situations. 2.5 This effort would be led by a Permanent Commission on Legislative Review, comprised of personnel from the DGI legal area and consultants as needed, whose task would be to carry out a continual analysis of proposed tax legislation, to propose modifications, and to anticipate the production of regulations to facilitate their application. The commission and DGI staff would use a Legislative Information Database containing all laws, decrees, resolutions, etc. created to support them in the preparation of new decrees and regulations, queries, and interventions in the administrative and judicial review processes. This effort would be closely coordinated with a similar, ongoing project at the Ministry of Justice under Loan 2984-AR to ensure compatibility, sharing of information, and to preclude duplication of efforts. 2.6 (b) Unification of Tax Regulations. Existing DGI regulations will be reviewed for redundancies, inconsistencies, and omissions, and a unified set issued to consolidate all previous regulations. H. Imurovements to the Administration. 2.7 This component will finance consulting services for technical assistance and training, and the acquisition of hardware to continue the improvements begun under Loan 3015-AR, replicating results  - 15 - obtained to zones, regions, and district offices, strengthening administrative areas not contemplated in the existing loan, and the revision in two years of the organization, functions, remuneration, and career paths of the DGI staff, with views to institutionalizing a new management culture. This component would have the following subcomponents: 2.8 (a) Revision of DGI's Structure and Functions. A new general organizational structure has been approved for DGI by Presidential Decree in June 1991. At the same time, the remuneration, career path, and other human resource-related issues of the proposed structure are embedded in the Collective Work Agreement entered into between DGI and its union, AEDGI, to which most DGI staff belong. The Collective Work Agreement has been reviewed by the Bank and found to be satisfactory as an initial starting point for personnel reform of DGI. In two years the proposed reforms and introduction of technology through this project are expected to be absorbed in the organization, and a review of the organizations and functions will be needed to update the Work Agreement; this would be done on the basis of internal surveys. The implementation of the diagnostic would be carried out by personnel of the DGI. At negotiations, DGI agreed to carry out an organizational study and review of personnel pc:icies and procedures within two years of project effectiveness. The resulting action plan would be implemented within a year of study completion. study. 2.9 (b) Extension of Administrative Systems. A number of functions at DGI Headquarters were identified as needing strengthening through the internal audit component of Loan 3015-AR. Through loan 3015-AR, systems are being designed and developed, and will be installed at headquarters. The proposed subcomponent would finance the acquisition of equipment for the installation of these systems in all DGI offices throughout the country, as well as training DGI staff in their use. These systems are: l - Target Selection and Control - Taxpayer External Auditing - Taxpayer Internal Auditing - Revision and Appeals - Personnel Administration: Recruitment, Benefits, Transfers, Control - Tax Accounting: Bank Collection, Returns, Collections, Accounting Register - General Accounting: Budget Programming and Execution, Financial Accounting, Accounts Payable and Receivable - Treasury - Assets Management - Acquisitions and Supplies 2.10 (c) Strengtheing the Research Directorate, The Research Directorate is charged with carrying out studies on the functioning of the administrative system and fiscal matters, analyzing and interpreting statistical information, and other tasks of information and analysis. At present, it is very weak, both in training and in equipment. This subcomponent would finance the training of Directorate staff in analysis and statistics, the acquisition of software and equipment and the creation of an information database. 2.11 (d) Strengthening the Training Department. The Department of Training offers courses in accounting, auditing, and general tax legislation, among others. The introduction of technology and the accompanying changes in functions and skills requires the strengthening of the department by modernization and enabling it to prepare and provide new courses and continuing support to the new technology and functions to be introduced. This subcomponent would finance technical assistance for the design of pedagogical material and course planning, provision of train-the-trainer courses and external training, acquisition of photocopying and pedagogical equipment and of microcomputers and peripherals, as well as modernization of the library through the acquisition of books and periodicals.  - 16 - 2.12 (e) Installation of Electronic Mail. Improved communications between the provinces and headquarters are necessary for Information dissemination, such as new regulations or interpretations of the law and messaging. This subcomponent would finance the acquisition of electronic mail software and the training of users in all DGI agencies. 2.13 (1) Central Lbrary The DOI suffers from a paucity of reference material on tax administration, legal aspects, and accounting, which severely constrains carrying out the routine functions of personnel In all areas, especially at headquarters, whe;.e policy is made. This subcomponent would finance the acquisition of books and furniture and the selection and training of librarians to create an adequate Central Library. 2.14 (g) Management Information System. The new automated systems Introduced through this project and 3015-AR will produce a wealth of Information for use by senior management for decision- making. A certain amount of collection and preparation for presentation is required for a more efficient use of this information. This subcomponent would finance the design and implementation of a simple Management Information System and training of support staff in its use. 2.15 (h) Supervision of DGI's Proceedings at the National Tax Court. The subcomponent would finance the design and implementation of a system for the supervision and monitoring of DGI's proceedings at the National Tax Court, the acquisition of hardware and training in the use of the system. This effort would also be closely coordinated with similar on-going efforts at the Ministry of Justice. 2.16 0) Strengthening the National Tax Court. One of the major problems regarding tax inspection effectiveness stems from the delay caused by the administrative review contemplated in the laws. The National Tax Court, to which taxpayers appeal DGI decisions, has an average waiting period for judgements of almost three years. The heavy caseload and the limited resources available to the Court do not permit increased efficiency in the future; the Tribunal's pending caseload is eight years behind and increases by 10 percent every year. To remedy this situation, this subcomponent would finance technical assistance for a diagnostic of National Tax Court administration and the development of a simplified and automated set of procedures at the National Court. In addition, the subcomponent would finance hardware and telecommunications equipment to run the system and provide access to the Legislative Database at the DGI and at the Ministry of Justice. 2.17 (I) Supervision of Penal Interventions. Unfavorable DGI audits, determination of arrears or penalties, fraud, etc. may result in interventions of the legal offices of the DGI throughout the country in the Penal Courts. There is at present no systematic way of monitoring such interventions. The subcomponent would finance technical assistance and hardware for the development and implementation of a system to this effect and training in its use; this effort would be closely coordinated with similar on-going efforts at the Ministry of Justice. 2.18 (k) Assistance to the Provincial Tax Authorities. DGI expects that the systems and procedures developed and installed through this project, as well as the training system developed, could be of assistance to the Provincial Tax Authorities. To this effect, once the new functions and technology have been absorbed, this subcomponent will finance consulting services for a feasibility study to determine the possibilities for technology transfer to the provinces. In anticipation of this, DGI will strengthen the "Consejo Federal de Organismos Tributarios de la Repdblica Argentina". 2.19 (1) Link with Social Security. Similarly, DGI expects that the experience gathered through this project could be useful to the Ministry of Labor and Social Security. The subcomponent would finance a feasibility study on the possibilities of technology transfer to that Ministry.  - 17 - III. Improvement of Taxpayer Services. 2.20 A May 1991 survey of taxpayers confirmed a common perception of lack of information on tax obligations, lack of enforcement, lack of motivation by DOI staff, too much emphasis on known taxpayers compared to unknown evaders, and the frequent amnesties granted by the Government. About 90 percent considered DGI to be inefficient. Low public regard for DGI's effectiveness is influential in precluding voluntary compliance; adequate service to the public similarly influences voluntary compliance. This component seeks to increase voluntary compliance by improving DOI's image and the services it renders to the public, both in information dissemination and direct services. The other components implicitly result in an improvement of the taxpayer services Infrastructure; this component specifically addresses this issue in four subcomponents: 2.21 (a) Collection of Taxpayer Information. The subcomponent would finance technical assistance for carrying out six semiannual surveys, targeting representative subsets of three groups of taxpayers: 1,000 Largest Taxpayers, 30,000 Large Taxpayers, and Other Taxpayers. The surveys would be done nationwide, and would identify public perceptions of service areas needing improvement, which in turn would be interpreted and analyzed by DGI staff. 2.22 (b) ImRrovement of Services. The subcomponent would finance technical assistance, training and hardware to prepare and execute a plan of action to improve services, targeting the three groups previously mentioned (1,000 Largest Taxpayers, 30,000 Large Taxpayers, and Other Taxpayers). Some services being considered include: better direct service to the public in local offices, direct access to the taxpayers' current account for queries and data input, and access to the Legislative Database. 2.23 (c) Program of Plblic Information Dissemination. The subcomponent would finance consulting services to prepare and execute a program to disseminate information to the public. 2.24 (d) Strengthening DGI Areas related to Information Dissemination. Several groups within DGI provide information to the public - Publishing, Press and Public Relations among them. The subcomponent would finance consulting services and the acquisition of equipment (microcomputers, publishing software, printers and technical assistance as well as training) to improve the effectiveness of these areas. IV. Improvement of Tax Collection. 2.25 This component will finance technical assistance, the acquisition of hardware, the refurbishing of offices and training to improve DGI's tax collection systems. Two collection systems are to be installed, using technology ' that facilitates compatibility across manufacturers and accommodates all computer sizes, from microcomputers to mainframes; they can therefore be installed in all DGI agencies. The Large Taxpayer Collection System was developed through Loan 3015-AR and will be installed in 36 agencies. It is a real-time system, and modifications to taxpayer records are done directly through a terminal compared with batch type systems which require deferred data entry. To function properly, the system is connected to a teller of a commercial bank installed on DGI premises; this eliminates one major source of error by verifying that funds transferred are correct. This connection is essential to the success of the Large Taxpayer Collection System, and therefore DGI must enter into a contractual agreement with a bank before installing the system in each agency; I/ The Oraclc Datsbme Managemcnt System mnning on a Unix Opemting System.  - 18 - this was agreed at negotiations. The development and testing of the Generalized Taxpayer Collection System will also be carried out under 3015-AR; it will follow the same principles as the Large Taxpayer Collection System and in effect be a modification of it; it will be installed under the new project. Due to the large number of taxpayers, it will be a batch system. 2.26 (a) Large Taxpayer Collection System. Second Phase. This subcomponent will finance the acquisition of hardware and training to expand the installation of the Large Taxpayer Collection System in the remaining agencies nationwide (approximately 110 more agencies). 2.27 (b) Generalized Taxpayer Collection System. This subcomponent will finance the upgrade of existing hardware to enable it to run as well the Generalized Taxpayer Collection System which would be installed in all agencies of the DGI nationwide (approximately 150 agencies); it would also finance consulting services for user training, and the refurbishing of all offices to enable them to accommodate the proposed hardware. 2.28 (c) Telecommunications Network. The projected increase in efficiency of operations through decentralized procedures and systems must be accompanied by an effective means of transferring information, both for operational reasons and for central control and monitoring requirements. This subcomponent would finance technical assistance for the design and installation of a telecommunications network linking all agencies and the training of users and network support personnel. 2.29 (d) Decentralization and Consolidation of Systems in the Mainframe. The existing mainframe systems, numbering almost 2,000, would largely become obsolete with the introduction of the decentralized and more agile Unix-based systems. Nevertheless, a relatively small number of systems (estimated at about 300), would still be operational. This subcomponent would finance consulting services to carry out the analysis of existing systems, identification of systems to transfer to the new equipment, modification of the systems and installation. 2.30 (e) Electronic Data Capture and Transfer. One of the main sources of error in data collection is data capture, i.e., the manual keying of data from paper into a magnetic medium. Although the new systems will reduce this type of error considerably, it will not be eliminated. This subcomponent would finance technical assistance for the design and implementation of a system for the capture of tax return data directly by computers and the training of its users, as well as the acquisition of computer and telecommunications equipment. A second source of errors and inefficiency is the transfer of funds, at present carried out through various automated and manual processes. This subcomponent would finance technical assistance for the design and implementation of a simple subsystem for electronic transfer of funds and training of users. V. Improvement of Taxpayer Auditing. 2.31 The component will finance the technical assistance and the acquisition of database software needed to expand the methodologies for sectoral analysis for taxpayer auditing developed under Loan 3015-AR to include new field techniques as well as analysis of the massive amounts of information needed for effective cross-checks, and includes the following subcomponents: 2.32 (a) External Information. The information which will be produced by the Large and Generalized Taxpayer Collection Systems will be collected at headquarters and can be cross-checked with information obtained from external sources to detect tax evasion trends across sectors and the full universe of taxpayers. To obtain external information, agreements must be made with suitable information-producing organizations such as agriculture cadastres, banks, industry-specific censuses, banks, export registering agencies, etc. This subcomponent will finance consulting services and  - 19 - hardware to provide assistance to these entities to enable them to produce the information in the correct format and state of correctness, and to receive and store at headquarters the information so collected. 2.33 (b) Internal Information and Database. The wealth of information produced by the new collection systems would be collected and consolidated with external information in a central database at headquarters. This subcomponent would finance the technical assistance necessary for the development of the database, the development of taxpayer auditing methodologies for sectoral analysis using automated tools, and the training of users and analysts. 2.34 (c) Imorovement of Field Taxpaver Auditing. The proposed expansion of the taxpayer auditing methodologies would include modern methods of field auditing. This subcomponent would finance technical assistance needed to develop an expert system for use by Inspectors (taxpayer auditors), the acquisition of portable microcomputers, and training of the inspectors. C. PROJECT COSTS AND FINANCING 2.35 Total project costs are estimated at US$30 million equivalent, based on prices of August 1991 (see Annex 3. Project Costs by Component). Bank-financed components represent 66.7 percent of the total cost, with the rest being financed by the Argentine Government. Local costs amount to US$16.8 million equivalent (56 percent of total costs); the foreign exchange component is estimated at US$13.2 million equivalent (44 percent of total costs). The proposed local cost financing is justified on the grounds that (a) public sector finances remain substantially weak; and (b) Goverrnent efforts to improve this condition - particularly through attacking tax evasion and increasing tax collection are creditable and warrant support. Project base costs are based on similar costs for on-going project 3015-AR, with the following proviso: it is expected that information technology equipment will continue to decrease in price, as it has done in the past 20 years. For this reason, no separate contingency allowance has been made, as costs are expected to be less than estimated. A PPF in the amount of US$1.5 million equivalent has been set up to support project preparation and start-up activities and will be refinanced under the Loan. The Summary of Project Costs (Table II.l) and the Financing Plan (Table II.2) follow.  - 20 - Table 11.1 Summary of Project Ccsts . Local Fotelgn Total % of Bass - (US$ thousands) . Legl Frwswk (a) Simplification of Laws 366 100 466 1.6 (b) Unifiation of Replations 158 20 178 0.6 ToW 524 120 644 2.1 d wh~h PPF 185 0 185 0,6 II. Ad _lbn (a) Rev. of Structure & Functkns 410 0 410 1.4 (b) Administrative Systems 570 2070 2640 8.8 (c) Studier DIrwtorate 63 140 203 0.7 (d) Training Department 450 200 650 2.2 (e) Electron Mail 163 50 213 0.7 (f) Central Ubrary 75 0 75 0.3 (g) Management Information System 80 0 80 0.3 (h) Supervision at Fisal Tribunal 217 200 417 1.4 (i) Strengthening Fisal Tribunal 175 200 375 1.3 (j) Supervsion of Penal Interventions 124 t20 244 0.8 (k) Provincial Tax Authorities 200 0 200 0.7 (I) Social Security Technology Transfer 50 0 50 0.2 Toal 2427 3130 5557 18.5 f whch PPF 208 662 870 2.9 Ill. TIxp,t SeMoee (a) Taxpayer Services 300 0 300 1.0 (b) Improvement of Services 564 0 564 1.9 (c) Dbination of Information 632 0 632 2.1 (d) Publishing, Pres, et. 100 50 150 0.5 Totl 15W s0 1646 5.5 o whIch PPF 58 0 58 0.2 IV. Cosetloes (a) Laie Taxpayer Collection System 8498 3000 11498 38.3 (b) Generaized Taxpayer Collection System 650 1500 2150 7.2 (c) Telecommunications Netvork 280 4150 4430 14.8 (d) Mainframe systems 230 0 230 0.8 (e) Electronic Data Capture 480 400 880 2.9 TOtal 1J138 9050 19188 64.0 of wh~h PPF 90 0 90 0.3 V. TaxPwVe AudiNg (a) Extera Information 130 260 39 1.3 (b) Intea Information 305 0 305 1.0 (c) Field Taxpayer Auditing 270 300 570 1.9 Total 705 560 1265 4.2 of whbh PPF 165 0 165 0.6 Proel Impmn_atIon UrI 1650 50 1700 5.7 of whch PPF 132 0 132 0.4 PROJECT TOTAL 16840 13160 30000 100.0 of wh_hPPP 838 662 1500 5.0  - 21 - Table 11.2 Financing Plan ToWl IBRD Dal % IBRD % DOI - (USS thousands) -- Consultants 4814 4165 649 86.5 13.5 Equipment 20478 12210 8268 59.6 40.4 Training 2183 1650 533 75.6 24.4 Office Refurbisbing 1075 825 250 76.7 23.3 Project Implementation Unit 1450 1150 300 79.3 20.7 PROJECT TOTAL 30000 20000 10000 66.7 33.3 ot whIw h PPF 1500 1500 0 100.0 0.0 L Legal Pranw k (a) Simplification of LAs 466 435 31 93.3 6.7 (b) Unification of Regulations 178 165 13 92.7 7.3 ToWl 644 600 44 93.2 6.8 of which PPF 188 185 0 100.0 0.0 IL Ad mnaretlon (a) Rev, of Structure & Functions 410 175 235 42.7 57.3 (b) Administntive Systems 2640 2640 0 100.0 0.0 (c) Studies Directorate 203 200 3 98.5 1.5 (d) Training Department 650 650 0 100.0 0.0 (ce) Electronic Mail 213 150 63 70.4 29.6 (f) Central Lbrary 75 75 0 100.0 0.0 (g) Management Information System 80 so 30 62.5 37.5 (h) Supernvion at Fcal Tribunal 417 375 42 89.9 10.1 (i) Strengthening Fical Tribuna 375 375 0 100.0 0.0 (j) Supervision of Pen Interventions 244 230 14 94.3 5.7 (k) Provincial Tax Autborities 200 200 0 100.0 0.0 (1) Soial Security Technolo Transfe 50 50 0 100.0 0.0 ToW 5557 5170 387 93.0 7.0 of whkh PPF 870 870 0 100.0 0.0 Ill. Taxpawer Seivine ( Taxpyer Sevice 300 300 0 100.0 0.0 (b) Improvementof Service 564 500 64 88.7 11.3 (c) Dissemination of Information 632 600 32 94.9 S.1 (d) Publishing, Press etc. 150 150 0 100.0 0.0 TOdl 1646 1550 96 94.2 5.8 of whIch PPF so 58 0 100.0 0.0 IV. coastuoa (a) Large Taxpyer Collection System 11498 4000 7498 34.8 65.2 (b) Generalized Taxpayer Collecon 2150 1950 200 90.7 93 (c) Telecommunications Network 4430 3430 1000 77.4 22.6 (d) Mainfram systems 230 200 30 87.0 13.0 (e) Eletonic Data Capture 880 830 50 94.3 5.7 Totle 191" 10410 8778 54.3 45.7 o tihkh PF 90 90 0 100.0 0.0 V. Taxpar A%ditg (a) Extera lInfomation 390 360 30 92.3 7.7 (b) Internal Information 305 260 45 85.2 14.8 (c) Field Tayer Auditing 570 500 70 87.7 12.3 Totdl 1265 1120 145 8865 11.5 ofwhEchPPf 165 165 0 100.0 0.0 Prota ml pia a A IU L% 1700 1150 550 67.6 32.4 of whIch PPF 132 132 0 100.0 0.0 PROJECT TOTAL 30000 20000 10000 66.7 33.3 ofwUmIhPPp 1500 1500 0 100.0 0.0  - 22 - D. COST EFliECTIVENESS ANALYSIS 2.36 Although technical assistance projects do not in general lend themselves to calculations of return on investment due to the institutional strengthening nature of the activities, the revenue gains in this instance can be projec ed to calculate their net present value (NPV) and cost effectiveness over both the total investment proposed and site-specific investments. Assessing Overall Projected Performance. 2.37 Based on its own estimates on tax evasion, DGI management conservatively estimates that the effect of implementing the Large Taxpayer Collection System in all agencies will be an increase in annual collection of 1.2 percent, and the increase due to the implementation of the Generalized Taxpayer Collection System in the same agencies would be 3.6 percent at project completion. The NPV projections given in Table 3 (see Annex 4: Cost Effectiveness Model) show that most of the reduction is achieved early: 79 percent in the first 5 years and almost 96 percent within the first 10 years (assuming that total Argentine GDP will remain at US$132.2 billion, which is the level of GDP projected by the World Bank for 1991, and zero real growth in the Argentine economy over the foreseeable future). These results have been discounted at a 25 percent real discount rate to in view of the historic volatility in the Argentine economy. Even with these conservative projections, revenue gains projected exceed project costs by substantial amounts; US$510 million in the first three years. 2.38 By project completion, collection costs are estimated to be roughly 3.2 percent of additional revenues, falling within ten years to 1.2 percent of tax revenue increase and in the long run to 1.0 percent. While the 3.2 percent ratio is high compared to overall cost-per-revenue ratios for most tax administering agencies, the 10-year and long-run ratios of 1.2 percent and 1.0 percent are squarely within the typical international standards for tax administration effortsk. 2.39 Moreover, cost per present value of project-generated revenue ratios are at or below typical enforcement cost-effectiveness ratios for the U.K. and U.S., which averaged between about 6 percent and 8 percent during the mid-1980's (see Annex 4). By project completion, this ratio is projected under a more pessimistic scenario to reach 7.9 percent; by year 10, 4.6 percept. its long run value is projected at 4.4 percent. Site-Secific Cost Effectiveness. 2.40 In the first three years of operation only one large agency (out of six) and 69 of the smaller agencies (out of 88 at present) will increase their revenues in excess of their site-specific costs. Over the long run, three of the six larger agencies and 82 of the 88 smaller offices would fail this test. International comparisons of enforcement costs per enforcement-generated revenues, however, suggest that a ratio of costs to revenues closer to .20 is a more appropriate performance standard. Using this criterion, nine of the 13 non-Buenos Aires regions, none of the six Dependencias Internas Fiscales, all but one of the 16 Agencias Capital Federal, and 31 of the 88 smaller sites would pass the cost- effectiveness test by project completion, and only one Dependencia and 33 small sites would fail over the long run. 2.41 Naturally, there are more, and equally important, criteria leading to the installation of the Large Taxpayer Collection System not only on these agencies but even in new agencies - since if S/ During 19776-77 tax administiton costs averaged just .56% of revenues in the United State, .96% of revenues in Austalia, 1. 1% of revenues in the Philippines and 1.01% of revenues in Canada. (Source: U.S. Congre, House Committee on WayS and Mean, Subconunittec on Oversight, Undergrownd Economy, Hearings, 96th Congress, lst Sesion, July 16, September 10 and October 9 and 11, 1979 (Washington, D.C.: U.S. Governmt Printing Office, 1980), p. 125.)  - 23 - Table 11.3: Projected Tax Revenue Improvemenb. Prolection 3 Years 10 Years Cuutlative Evasion Reduction .0303 .0476 Marginat Evasion Reduction .0072 .0008 Cum. Additional Revenues per GOP .0029 .0046 Project Cost per NPV of CumuLative Additional Rev. .0325 .0124 Year's Nominal Evasion Reduction Revenue 388.95 610.23 Net Present Vatue 509.65 1366.91 Notes: In millions of 1991 US dollars. Assumed initiat year evasion reduction = .0134 Assumed decay rate of evasion reduction * .35 Assumed annual real discount rate o .25 enforcement effectiveness were perceived to be uneven across the country, an incentive would be created for taxpayers to relocate their taxable ac.ivities to those regions with lax enforcement activities. Moreover, in this way favoring evasion efforts of some taxpayers over others, the perception of fairness of tax admirnistration in Argentina would be compromised, and undermine taxpayer compliance throughout the country. 2.42 There are many additional benefits of the computerized Large Taxpayer Collection System not captured in this analysis. These include reduced data entry errors, enhanced ability of DGI management to control both the receipt and registering of tax returns and tax payments, improved accuracy and timeliness of current accounts reports, and others which cause these revenue projections to understate the true cost-effectiveness of these site-specific investments. 2.43 The implementation of the Generalized Taxpayer Collection System for smaller taxpayers is estimated to cost approximately US$2.72 million; DGI management estimates that this implementation will generate an additional US$239 million in tax revenues. This is an extremely cost-effective investment, yielding a cost-effectiveness ratio of 0.80 percent by project completion, 0.31 percent after another 7 years, and 0.26 percent over the long run.' These ratios are at or below international norms even for overall tax administration cost-effectiveness (see earlier footnote). This effort thus appears to be highly cost-effective regardless of what set of assumptions are employed to project results. E. PROJECT BENEFITS AND RISKS 2.44 The principal benefits of the proposed project will be a decrease of tax fraud and an increase in collection revenues very conservatively estimated at better than US$175 million per year, significantly contributing to more sustained Government financial improvements. This will result from the modernization of the collection system and procedures and taxpayer auditing mechanisms; a more efficient DGI operating in a modem and participatory manner through the introduction of administrative and monitoring systems, with the consequent improvement in access to information, transparency of decisions and accountability; improvement of the culture of the organization; increase in DGI productivity due to better service quality and better managerial practices and more timely 6/ As in the previous et of projections, thes projections assume evasion reduction decay rtes of 35% per annum and real discount rte of 25% per year. First year evasion reductions arm expected to yield curent values of projected annual revenue gains equal to DGI management's prcjected revenue gain by the end of year three.  - 24 - decision-making, as well as higher qualifications of personnel employed due to better hiring and payment practices; and an increase in voluntary compliance by the population as a result of a perception of a more just and equitable distribution of the tax administration burden through the impartial and evenhanded application of simplified laws to the full universe of taxpayers. 2.45 The major risks to project implementation are possible changes in leadership leading to changes in project strategy, and overloading the capacity of the organization to accept change. To reduce these risks, the Government agreed at negotiations to guarantee the continuity of the Project Implementation Unit to diminish the effect of a change of political leadership or senior management; this would be agreed at negotiations. To minimize disruptions, new technology will be introduced by developing pilots in selected agencies, and their subsequent extension to all agencies. m. PROXECT IMPLEMENTATION A. AGENCIES INVOLVED 3.1 DGI will be the executing agency for this project; it will also be responsible for providing counterpart funds. Two other agencies are involved, both under the Secretariat for Public Revenue, as is the DGI. These are the National Tax Directorate, with which DGI will work on producing the simplified tax law set ("texto ordenado" - 2 percent of project costs), and the National Tax Court, which will be strengthened in coordination with DGI (1 percent of project costs). B. PROJECT EXECUTION 3.2 The proposed project would be completed in four years. Annex 5 describes the key project activities, their performance indicators and the implementation schedule, all of which will be further refined as the project advances. Training is an important aspect of the project, and to assure central coordination and economies of scale, a cross-component training plan has been produced. Specific training programs will be submitted for approval to the Bank on a yearly basis. To implement the project, a Project Implementation Unit (PIU) has been set up in the DGI, now tasked with the implementation of the first Tax Administration Loan. The PIU will report directly to the DGI Director General, and will comprise a Project Manager (consultant), a Deputy Project Manager (DGI staff), a Cross-Component Coordinator (DGI staff), and miscellaneous support staff (see Annex 6: Project Implementation Unit). The PIU will be strengthened by specialized consultants for part-time or fixed-term contracts (training, administration, hardware, and software), and DGI will provide clerical, equipment, office and related support to the PIU. The PIU will also continue to coordinate the on-going first Tax Administration Project (3015-AR) until its end scheduled for 1992. To ensure the continuity of the project, the Government agreed at negotiations to maintain the composition of the PIU during the execution of the project. 3.3 Assurances were obtained during negotiations that within six months of project completion DGI will prepare a Project Completion Report (PCR) to assess the success of the project, including the achievement of institutional, administrative, operational, and financial objectives and goals, and general evaluation of the lessons learnt from project experience. C. PROCUREMENT 3.4 Procurement of goods under the proposed project will be carried out in a manner consistent with Bank Procurement Guidelines (May 1985). Consulting services would be contracted in accordance with the Bank Guidelines for Use of Consultants (August 1981).  - 25 - 3.5 The bulk of the procurement of goods consists of information technology equipment and system software for an estimated US$9 million, which will be acquired in packages of not less than US$500,000 each through international competitive bidding (ICB). Supply contracts will include maintenance and technical assistance; a one-year warranty must be provided by the manufacturer. To the extent practicable, pedagogical equipment, standard software packages and office furniture estimated to cost US$100,000, US$200,000 and US$200,000 respectively will be packaged into contracts of not less than US$25,000 each and procured through LCB procedures acceptable to the Bank. Miscellaneous technical books and publications may be procured through local/international shopping or direct purchasing in packages valued at US$25,000 each or less up to an aggregate of US$100,000 equivalent. Since book purchases would be for small numbers of the same title, it would not be practical to procure these through LCB. The Bank's Standard Bidding Documents would be used for all ICB and LCB procurement. 3.6 Office preparation and refurbishing will be geographically scattered and therefore relatively small in individual size. Therefore, local shopping will be done for contracts valued at US$35,000 or less, requesting at least 3 quotations from eligible contractors; for contracts above US$35,000, LCB procedures acceptable to the Bank would be used. 3.7 The Bank's prior review of procurement documentation (based on the Bank's Standard Sample Bidding Documents) will cover all major procurement steps (advertising, bidding documents, evaluation methodologies and reports, award recommendations and contracts), and would apply to all contracts procured under ICB and the first two contracts for goods and for office refurbishing under LCB regardless of their value. The Bank will also review all documentation (terms of reference, evaluation of proposals and evaluation methodology, award recommendations and contract) for all consulting services included in the project, both for individual consultants (Project Implementation Unit and specialized consultants: training, legal, administration, statistics and publishing) and contracts for technical assistance, training and software development, as well as results of the studies. To ensure maximum participation by DGI staff and reduce coordination difficulties, a ceiling will be set to individual consultancies (excepting the Project Implementation Unit), in the amount of USS 1.2 million, all other technical assistance being carried out by consulting firms or other entities. The limits established for prior Bank review of procurement decisions will result in a coverage of over 90 percent of Bank-financed project costs. 3.8 The borrower's procurement regulations and procedures have been reviewed by Bank staff in the context of previous projects (most recently, 3015-AR) and have been found acceptable for all methods of procurement proposed under the project. 3.9 Tables HI. 1 and 111.2 summarize the project elements and their estimated costs and proposed methods of procurement, as well as the procurement implementation schedule.  - 26 - Table 111.1 Summary of Proposed Procurement Arrangemenits (US$ million equivalent) Procurement Method Total Project Element ICB LCB Other N. B. F. (a) Cost 1. Works 1.1 Office Refurbishing -- - 1.1 1.1 (0.8) (0.8) 2. Goods 2.1 Computer Equipment 8.8 7.3 16.1 (8.8) (-) (8.8) 2.2 Telecommunications Equipment 3.4 0.8 4.2 (3.2) (0.0) (3.2) 2.3 Software Packages 0.2 0.2 (0.2) (0.2) 2.4 Books (b) 0.1 0.1 (0.1) (0.1) 2.5 Fumiture 0.2 0.2 (0.2) (0.2) 2.6 Pedagogical Equipment 0.1 0.1 (0.1) (0.1) 3. Consultancies (c) 3.1 Design and Supervision 1.0 1.0 (0.9) (0.9) 3.2 TA & Software Development 3.8 3.8 (3.4) (3.4) 3.3 Training 2.2 2.2 (1.6) (1.6) 3.4 Project Implementation Unit 1.7 1.7 (1.1) (1.1) 4. Miscellaneous TOTAL 1Z2 0.5 10.7 - 7.3 30.0 (e.) (12.0) (0.5) (7.9) (-) (20.0) Noat": 1gw.s hi p _wonU wea am rU ptIv. aonsft nbw,cd by tho Bank loon. (,) N.M". = No Bank fk,acd. In t c, 001 oounterpuet hundn. (b) booke loaIimeanaluhhoppft or dlet porc.s.. (ca) A oonouoig .wvlc. ahouldbe prow.dh In oordance wHh World Bank. Cadeeh.. U. of conuadnws by Wod Bank Borrowers and by the World Bank a Executig Agncy (Waahingln on.Q, Auut ?1ua1 (d) roteM am not xmut du lo remdb,  - 27 - Table 111.2 ARGENTINA SECOND TAX ADMINISTRATION PROJECT Implementation Schedule Estimated Annual Contractual and Other Payments (US thousands equIvalent) Pro Prolect Yw Total Remarks Project Element project 1 2 3 4 Payment Works 25 195 363 ISO 50 813 LC8/Sbopp. Office Refuitkbing x 73SS 2125 2050 375 11918 ICB Minis & periphea '*, ,x 1950 S50 850 500 4150 ICB / LCB Telcommuniatiom Equipment mxx m _ 50 is 400 550 550 1565 ICa Upgrade of equipment *** 00' mx X 400 200 700 660 100 2060 ICB Replkation of Admin Systems *ff x xx, _,xxr 121 30 79 230 LCB Software Packagte .. _ ___ 100 100 Shoppingor Books Direct Purchse 100 100 LCB PeeAgogical Equipment Conauhnncbe 160 298 294 274 174 1200 Individual consultants *s *WIMUIXXXX - S1 98 102 sO 331 Revision of Structure & Functionrm _s _ 265 WS 61 10 931 LeglTA "s ,.K 10 SS IS 80 MIS e 20 180 200 Expert Systems see 35 395 50 480 Tax Retuns & Electronic Tansfer sm , x 35 225 25 35 320 Taxpayer Auditing Database . * , _ . K_ 24 135 92 65 316 Replication of AUD1N _m -X & training 171 395 495 265 IS 1341 Repliation of Colection Systems 3 X - _ & traning 25 75 100 Intallation of EM & traing XXX 58 332 300 400 100 1190 Taxpayer services m _ 10 75 75 70 230 Desin and imp. of network *0 xscn x x 90 S0 30 200 Review of mainframe "stems 110 12S 120 70 20 445 Improvement of info. exchange *es _ , m - Po Imp b_ Unt 200 375 375 375 375 1700 TOTALS 9,036 7,955 6,640 4,336 2,023 30,000 (Bank*1nanced (1,50) (7,495) - (6,00) (3,315) (1,610) (20,000)  - 28 - D. DISBURSEMENT AND SPECIAL ACCON 3.10 Disbursemeints of the Bank loan would be made against 100 percent of costs not provided as counterpart. By Loan effectiveness, DGI should have signed a Management Service Agreement Contract with an acceptable procurement agency and prepared an administrative manual identifying steps and times for administrative processes. For expenditures outside the Management Service Agreement, a special account in US dollars with an authorized allocation of US$1.5 million, equivalent to an estimated four months of average disbursements, would be established in a bank acceptable to the Bank; the PIU would be entitled to make periodic withdrawals from the Special Account at the exchange rate applicable on the day such account is debited; and the Bank would replenish the Special Account for the amount of the withdrawals on account of eligible expenditures at the request of the Borrower. Disbursements would be made on the basis of Statements of Expenditures (SOE) for office preparation and refurbishing, goods and equipment contracts valued at less than US$200,000 equivalent. The documentation for these expenditures would be retained by the executing agencies, with copies in the PIUJ, and made available to Bank staff during supervision missions. Al' other expenditures would be fully documented. The use of the Special Account and Statement of Expenditures were agreed at negotiations. E. ACCOUNTING AND AUDIrS 3.11 The PIU will maintain records for each project component, and consolidate them into the project accounts and SOEs. Supporting documentation will be maintained by the PIU and made available to Bank missions and independent auditors as required, as agreed at negotiations. 3.12 Project accounts, including the special account and SOEs, will be audited annually in accordance with appropriate auditing principles applied by external private independent auditors acceptable to the Bank, with terms of reference for auditors and reports approved by the Bank; this was agreed t negotiations. Cost of the consultant services to be employed for the annual audits (US$50,000 equivalent through the life of the project) will be eligible for financing under the loan. Audit reports will be furnished to the Bank within five months after close of the Government's fiscal year (June 30); this was agreed at negotiations. F. PROJiECT MONITORING 3.13 The PIU's primary responsibility will be the timely execution of the Project Implementation Plan. Project performance indicators (Annex 7) will be monitored to track improvements in the overall efficiency and effectiveness of the DGI. Overall monitoring and evaluation of the project will be the responsibility of the PIU, which will be responsible for the physical and financial monitoring of project activities. Specific tasks include: (a) preparing semiannual progress reports on project implementation, which would be submitted to the Bank by May 30 and November 31 of each year; (b) measuring quantitative and qualitative objectives achieved; (c) reviewing and updating project implementation schedules and submitting them to the Bank for approval; (d) preparing the Project Completion Report. These responsibilities and tasks were agreed at negotiations. To facilitate measuring partial objectives reached, key activities have been identified by DGI and performance indicators derined for each one. 3.14 Monitoring by the Bank will be carried out in semiannual visits (around July and December) to review the progress in the implementation of the project, and discuss modifications to the Action  - 29 - Plans and allocation of resources. An extensive mid-term review will be carried out at the end of the second year of execution of the project. In addition, it is expected that IMF specialists will continue their supervision and assistance visits to the DGI. IV. AGREEMENTS REACHED AND RECOMMENDATIONS 4.1 At negotiations, agreements were reached with the Government on the following: (a) DGI will carry out an organizational study of DGI and a review of personnel policies and procedures no later than two years after effectiveness; the resulting action plan would be implemented no later than three years after effectiveness; (paras. 1.27 and 2.8). (b) Before installing the Large Taxpayer Collection System in an agency, DGI should have entered into a contractual agreement with a bank to set up a counter in this agency (para. 2.25). (c) The Government will agree to maintain a Project Implementation Unit (PIU), including a General Coordinator and appropriate staff, whose organization and staffing is acceptable to the Bank, for the duration of the project (paras. 2.45 and 3.2); (d) DGI will implement the staff training plan presented at negotiations in a manner satisfactory to the Bank (para 3.2); (e) Individual Consultancies (excepting the Project Implementation Unit) will be limited to a maximum of US$ 1,200,000, all other technical assistance being carried out by contracts with consulting firms or other entities (para 3.7). (f) Use of the Special Account and Statement of Expenditures; terms and conditions, accounting and auditing procedures (paras. 3.10 and 3.11); (g) The project special account will be audited on annually by auditors acceptable to the Bank, and the audit statement would be sub.nitted to the Bank no later than June 30 each year (para. 3.12); (h) DGI will carry out the Project Implementation Plan in a timely fashion (para. 3.13); (i) The PIU will provide semiannual project implementation reports in May and November of every year, measure quantitative and qualitative objectives achieved, review and update project implementation schedules and prepare the Project Completion Report (paras. 3.3 and 3.13); 4.2 At effectiveness, the following condition should be met: DGI will have signed a Management Service Agreement Contract with an acceptable procurement agency and prepared a manual detailing administrative procedures and defining reports to be used by DGI staff and the Bank for project supervision. (para 3.10).  -30- Recommendations 4.3 Subject to the above assurances and conditions, the proposed project wouid constitute a suitable basis for a Bank loan of US$20 million equivalent to the Republic of Argentina, for a period of 17 years at the Bank's standard variable interest rate.  - 31 - Annex I I1.1 THE GENERAL TAX DIRECTORATE (DGfl 1.1 The General Tax Directorate ("Direccidn General Impositi-a" or DGI) is an agency reporting to the Secretariat of Public Revenues in the Ministry of Economy. TiL Sational Tax Department ("Direcci6n General de Impuestos"), the National Tax Court ("Tribunal Fiscal") and the National Customs Administration also renort to this Secretariat. The National Tax Department is in charge of formulating and initiating legislation and, therefore, is ir close touch with the Legislative Power (Congress). In discharging these duties it is not required to consult with DGI. The Fiscal Tribunal produces judgements of appeals by taxpayers regarding the DGI's determinations of their arrears and/or penalties. 1.2 DGI is responsible (Presidential decree 1237 of June 26, 1991, Annex II) for administering taxes, encouraging voluntary compliance of legal and regulatory duties, promoting a permanent improvement of the image of the institution, in particular with respect to its integrity and efficiency, and the coordination and supervision of all departments and other units of the DGI to improve their efficiency. It is headed by a Director General, assisted by four Deputy Directors General in charge of the Planning, Operations, Legal and Administration and some advisors, specialists in administration and computerization. In addition, a Fiscal Auditing Unit, and Internal Auditing and Supervisicn Unit report directly to the Director General (see Organization Chart, below). 1.3 The central office is responsible for setting national operating and compliance policies, collecting, receiving and auditing taxes and taxpayers, collecting statistics, conducting technical research, keeping in touch with the public and taxpayers for information and educational purposes, and monitoring departmental performance as well as organization-wide administration. 1.4 Approximately 76% of DGI's staff work in operations, 5% in planning, 6% in legal, 12% in administration, and 1% reports directly to the Director General. The four Deputy Directors oversee 16 Directorates plus the provincial administration. At this point it is perhaps useful to state that because of the Federal organization of the Government of Argentina, at the provincial level there are two different tax administration offices. One is staffed by DGI personnel and is directly responsible to the central administration of DGI in charge of collecting national revenues. The other, totally independent, is responsible only to the Provincial Government, and is in charge of collecting provincial taxes (mainly real estate and municipal taxes, and some stamp duties). These tax offices belonging to the Provinces are staffed by provincial (non-DGI) tax collectors. The national revenues are split between the Central Government and the Provinces according to the Co-Participation Law; half goes to the national treasury and the remainder allocated to the provinces in proportions defined in the Law. 1.5 The provincial offices in each of the 23 provinces are staffed by personnel appointed by DGI, following an organizational pattern similar to the one existing at the central level. They are in charge of collection and auditing at the provincial level. Therefore they carry out important activities like receiving tax returns, assessing liabilities, dispensing taxpayer services, auditing taxpayer accounts, investigation of fraud, and preparing cases for litigation. 1.6 To manage the provinces, DGI distinguishes three zones in charge of Directors appointed by the Director General and who report to the Deputy Directors General in the fields of their competence and jurisdiction. These three zones are subdivided in fourteen regions, 2 with five regions and one with four. Under the regions there are more than 100 districts in charge, basically, of administrative functions (reception of declarations, notifications, supporting auditing activities).  - 32 - Annex. 1.2 Personnel and Policy Issues 1.7 All public and private organizations in Argentina operate under a Collective Work Agreement between the union and the organization. DGI and its union, AEDGI ("Asociaci6n de Empleados de la DGI"), began negotiations for a new Collective Work Agreement in 1990. Agreement on terms not having been reached, it was submitted to arbitration by the Ministry of Labor. In November 1991, the Ministry of Labor decided in favor of DGI, with small modifications. The union appealed to the Labor Chamber at the Ministry of Justice, which in December decided in favor of DGI. It is expected that the union will accept the Agreement, although an appeal to the Supreme Court is still possible. In the meantime, important features of the old Agreement have been suspended by Decree, and DGI has been operating under the modified old Agreement. The most important of the suspended features are the abolition of lengthy procedures for the dismissal of permanent personnel, the removal of union participation in managerial decision-making including promotion of personnel, and union licenses, whereby DGI continued to pay employees carrying out full-time work for the union. 1.8 DGI has a satisfactory organization and structure. It consists of a simplified organizational structure at headquarters and a decentralization of functions and responsibilities to agencies in the provinces which will be complemented by the introduction of operational and administrative systems and training through the proposed project. Staff are distributed by function performed rather than by tax collected, and DGI currently employs 16,000 people of whom 11,000 are permanent staff (9.629 in the present permanent payroll plus 1,500 transferred from the railways who are in the process of being reassigned within DGI). The remainder is transitory staff without a permanent appointment, hired for a one-year renewable period. At this time, they comprise 4,300 students doing administrative and clerical work plus 600 new taxpayer auditors. DGI intends increasing its personnel to over 18,000 by hiring 2,000 new professionals, mainly accountants, and 300 administrative staff. 1.9 About 50% of the staff are at the central administration office and the province of Buenos Aires and 50% in the remaining provinces. The distribution of staff among these offices indicates a reasonable balance between the center and the other organization levels, although the number of staff dedicated to administrative functions is high in comparison with Tax Administration Agencies in other countries. Skills and Seniority of Staff 1.10 Over one third of the permanent staff have university degrees, mainly in accounting (70%) and law, plus administration or economics, and a few in other fields. Staff grades range from 1 to 26; entry level is usually grade 3. About half of the permanent staff are at grade 17 or higher, grade 17 being the lowest professional grade. Close to 2/3 of the permanent staff is between grades 17 to 20. About half of the permanent staff is 45 years old or over; however, the non-permanent staff includes the above-mentioned students, which lowers the age average. Over 50% of the total are male. The employment period in DGI averages over 15 years for professionals and is much higher for adlministrative staff (60% of the staff have over 14 years of service, of which a few have over 40 years of service). Recruitment Policies and Procedures 1.11 Every year a decree of the Government approving the fiscal budget determines the size of the permanent and non-permanent staff of the DGI as well as its financing. Following general guidelines given by the Director General, the Directorate of Human Resources defines the characteristics  - 33 - Annex 1 1.3 of the additional staff needed, if any, usually with emphasis on accountants and lawyers, and invites, through the media and universities, interested candidates to apply. An entrance examination is given to the candidates chosen, after a process of pre-selection since the number who apply is usually larger than the vacancies to be filled. Those selected by the Direction of Human Resources are invited to take a further psycho-technical examination as a last requisite for appointment. Salary Levels Table 1: Rcpmentativo Mozh1y SaIacs in tho DO (in USS) 1.12 DGI salaries are F Prent Proposed composed of a base salary plus a Sr Ls s monthly bonus based on collections and aOireot 20 1.360 3.730 Advisor 26 1.030 2,210 a performance evaluation. Four per INV. chb 24 1.413 2.236 thousand (0.4%) of the collections Advisor 23 190 1,792 Sue.lviaor 22 1,509 2,277 (equivalent in 1990 to US$ 55 million, lstirvot,, l e 991 1,339 or the equivalent of US$ 3,400 per DGI Admininstrtor 10 447 716 staff member per year) are reserved to Adcinistratot 4 407 631 increase the remunerations of the DGI Note: th "bove slary sole does not include theollion bonuses of 30-50% staff ("Cuenta Especial de of 5lary. Jerarquizacidn"). 35 percent of this amount is paid to the employees proportionally, according to their salary level. The rest is distributed following a bi-annual merit review; levels 23-24 in managerial positions, and all 25-26 (about 1200 employees), receive a 100 percent bonus each month. The remaining staff are classified into five categories according to performance, receiving no bonus, 25 percent, 50 percent, 75 percent and 100 percent bonus. The amount of the bonus depends as mentioned on collections, and is calculated using a complicated pro-rating formula according to grade and salary; it is common for high performing staff to receive a bonus equal to 30-50 percent of their salaries. 1.13 The old salary scale presented a constraint to recruitment of specialist technical staff since they wpre not competitive with salaries in the private sector. This induced many staff members to hold additiuiial marginal jobs, and influenced the recruitment policy, which in consequence tended to favor hiring of students on a part-time basis (S hours a day). As soon as the Collective Work Agreement is ratified by the Union, DGI proposes raising salaries to more competitive levels. The new salary scales have been determined, and are part of the Agreement (see Table 1). Promotions 1.14 In 1990 the automatic system of promotion by seniority was discontinued. The new method requires candidates to undergo a mandatory examination before being eligible for promotion. Between October 1991 and February 1992, more than 1000 examinations for managerial positions wil take place, to promote staff to vacant positions and to review staff who are acting but have not been confirmed in managerial positions. Staff Training 1.15 The Department for Training and Staff Development in the Directorate for Human Resources has 60 staff and has been in existence for 23 year. It offers courses in accounting, auditing and general tax legislation oriented to improve the technical capabilities of the taxpayer auditors. They  - 34 - Anneax 1.4 also offer courses specifically designed to meet the needs of administrative staff, such as informatics and clerical skills. The length of these courses ranges from one week to three years on a part-time basis. Training units exist also in the provinces. 1.16 Funded by 3015-AR, DGI has reached an agreement with the University of Buenos Aires to offer courses for taxpayer auditors. The first group of 240 auditors and supervisors started training in August 1991. Other courses are being given, such as a one-week course on planning fiscal auditing, and another on systems analysis. 1.17 The computerization of many of the functions of the DGI will require intensive training; some of this will be done by the consulting firms developing the software, but it is intended that most of the training, especially in the provinces, be carried out by DGI staff to ensure continuity and sustainability. Extensive training of DGI staff, including "train the trainer' courses will therefore be required.  DIIa Ow.1uz I mm1 i;IUII Wdm a NwUlYSw o) _o A v K>m svwm A amug%u _ l l=V _ I eV |-=7la 11vm::~ I~~ ~ ~ o l  - 36 - Annex 2 2.1 EXISTING AND PROPOSED EOUIPMENT F1OR DG Oth,r than the existing hardware, all descriptions given are indicative of the size, performance and number of equipment required; more precise determination can only be made during the execution of project. Exstins Hardware at headquarters and In all 132 agendes One mainframe (IBM 4381 model R24) with 32 Mbytes of internal memory (RAM) and 67 Gbytes of off-line storage on hard disk (HD). 6 tape units. One laser printer (IBM 3800). 2 line printers (IBM 4245 and 4248). Approximately 100 terminals (IBM 3278 and similar). One communications front-end processor (BM 3275) with 40 ports. 16 workstations dedicated to data entry, Olivetti D-730 (8 operational); 45 IBM AT personal computers (older technology 80286 chip). One minicomputer recently acquired to run the Large Taxpayer Collection System (IBM RS6000 model 530), running Unix V with 32Mbytes RAM and 1.6 Gbytes HD. 27 terminals (IBM 3151). Equipment to be acaulred with counterpart funds 45 minicomputers, RISC technology, using UNIX V; 32Mbytes RAM and 1.5Gbytes HD; 824 terminals. 94 printers with speeds of 400 lines per minute (1pm); 87 printers with speeds of 300 characters per second (cps); 240 dot-matrix printers with speeds of 200 cps; 4 laser printers with speeds of 10 pages per minute (ppm). 240 personal computers (PCs), MS/DOS operating system, 80386SX chip with 2Mb RAM and 60 Mbytes HD. Eouipment to be acquired with Bank funds For Improvement of the Administration: 2 Unix servers, 30486 biprocessors, with 24Mb RAM and 400 Mb HD and 32Mb RAM and 850 Mb HD, respectively, to service the Electronic Mail network. I Unix server, 80386, 16Mb RAM and 320Mb HD for the Research Directorate. 221 PCs, 386SY. 22 for electronic mail points not already included in the network; 12 for the Research Directorate; 3 for the Central Library; 184 for the execution of administrative systems. Memory increase and Ethernet and X.25 connectivity for the Training Dept. equipment.  - 37 - Annex 2 2.2 132 dot-matrix printers: 92 for adminstrative systems, 4 for the Research Directorate, 16 for Electronic Mail, 18 for the Training Dept. and 2 for the Central Library. 3 Postscript laser printers, speed 17 ppm, for Electronic Mail, for the Research Directorate and for the Training Dept. 30 communications equipment for the principal node of the electronic mail network and for interconnection with points not already included through other systems. 1 Unix 386 server, 16Mb RAM and 320Mb HD, for the Penal Intervention area; 2 Unix 486 servers, 32Mb RAM and 640Mb HD, for Judicial Proceedings and the Legislative Database; 1 Unix 486 biprocessor server, 32Mb RAM and 1Gb HD, for the Fiscal Tribunal. 70 PCs 386SX, connected via Ethernet with the above 4 servers (40 for the Fiscal Tribunal and 30 for the Legal Areas in DGI). 41 printers, speed 300 cps, for the 70 PCs. 3 terminals of the type UNTerminal, for loading data into the Legislative Database. 2 Postscript laser printers with speeds of 17 ppm. Communication Equipment for connection with the general network. For Improving Taxpayer Services: For the publishing areas: 3 Maclntosh II FX, one Postscript laser printer with speed 17 ppm, and one scanner of 300 dpi; Miscellaneous equipment to be determined for direct payment through terminals of type POST, reception of taxpayer returns in magnetic media, and payment and queries through public and financial networks. For Improving Tax Collicton: (a) For the Large Taxpayer Collection System: 60 RISC UNIX minicomputers, as Pefore. 40 UNIX multiuser 80486 computers, 16Mb RAM and 320Mb HD. 900 asynchronous terminals, for the above multiusers and minicomputers. 110 X.25 connection boards.  - 38 - Annex 2 2.3 170 heavy duty dot-matrix printers; 170 slower dot-matrix printers. (b) For the Generalized Taxpayer Collection System: Expansion of memory (32Mb more) and disk (600Mb more) for 9 of the minicomputers. 10 RISC UNIX minicomputers, as before. 46 UNIX multiuser 80486 computers, 16Mb RAM and 320Mb HD. 184 386SX PCs to form 3-machine local area networks for 46 agencies and for equipment to capture taxpayer returns. 396 asynchronous terminals, for the above multiusers and minicomputers. 138 X.25 connection boards (46 for the RISC machines, 92 for the PCs). 138 communications lines (including point-to-point, public and satellite). Modems for all equipment, switching devices and network control, measurement and monitoring equipment. Small laser printers, scanners and other optical devices for data entry of taxpayer returns. Heavy duty dot-matrix printers for all agencies. For Improving Taxpayer Auditing: 100 386SX laptop portables and 100 Dyconix-type printers, for field auditing. 8 386SX PCs, as information transference workstations for external lonformation source agencies. Communications equipment for the PCs.  -39- Prolect Coos by Componert Annex 3 211 kak Financed Counterpart Funds Cemlg one" risk O_ aml TOd :MaM . I_d T*d 0 Til 0i 11. A _Olflhbal.~ 1065 3x 710 Ui 1703 30O e o 3r 1 55 IILT IUIt5 o so u 0 I1 o o 9* 1 16 IV. Ca _ dlom m 81tO 610 S10 10410 f21 41* 50 .,7I lot" V. rVoWAud g 5so 5s0 0 0 I15 0 20 0 145 15 llTp4 Sw 111 SlIOO O2 0 1S50 3t0 0 0t 94O 144 POJECTTOTAL U t 1331 O tm e 1000 s0o am no IMlO m0000 du*MAf P 760 443 78 O Ut0 1 0 O 0 Ut0 L Lae rwak (a) S 5upWk1can of Lam D)p ItSUPU6d 40 40 10 to so AnaM- d. 200L 200 10 10 210 Sy9t enauoUn 90 100 I 195 Ill it 2t Subl" Su 100 e 0 433 20 0 I 0 31 4" (b) Undlaon of R q_ DuWIASuprAia9 350 30 13 U 43 Ahu A SimpL t0 40 0 e0 Systinmu I_ so z0 7 0 75 u.em 140 e e 0 1 13 0 0 0 I3 173 TOTAL 470 00 no 33 a II 0 44 e 4 wmo ww Ls s (a) Rcv. Of 9SU%Wn e pAiMaI D"ip&S" A lo 1oo 39 5 1 TA: lnwal Sww 50 50so 120 t70 TA. Rwpabasn ZS zs 76 74 101 Isaum" 175 0 0 0 I73 an3 0 0 0 206 400 (b) Ad _b-ulw Sy- 1.ad. Habm P 0 7o 7 0e 70 RapMmtie 3210 20 2410 0 2410 S d(wm Pedmg 140 1to 0 160 Seaeil 70 am7 200 0 ea4 0 0 0 0 0 140 (ca) S uwd4 Dk ta,u SXwwsogu. 1in 20 144 2 3 103 Se.am uu e 20 0 0 a 4 0 0 ladmuSa 40 140 30 e 20 o I 0 0 3 0 3 203 (d)TaAInInDOeRI DesiOpmdSWada 10t 1oo 300 no0 0 0so Pedascmal eqd-nm 100 100o 100 Lbauy so so so5 Bubb 100 no 200 0 no 0 0 0 0 0 "a (a) Eiasuw MNd SoftapadkAox s0 100 150 6s 43 21 11116" 0 so 100 a IS 1O 0 0 so 0 o3 213 (0 C50 r1l LuoalY Cmzio so *0 1 is 75 0 75 submw 0 so is 16 71 a 0 0 0 0 75 (g) ManagmeLdOuaadON ,K. syuaIinihONia so so so subl S 0 0 0 so 30 0 0 0 20 (b) SupA*lof as Pb T1 dl . spimaalAl 145 200 10 375 35 7 42 417 SM_ M 2e0 10 0 373 el a e a 42 417 (i) Su 0 b9d ASl TrIll Syate ImzNalaha 1ts 200 10 375 0 37 1S1111 10S m 10 0 m 0 0 a 0 0 375 @D Supa*len d Penl 1 _ I .a syatm Imidhdo so no0 to 230 14 14 4 subb" Be l so 0 330 0 14 0 14 244 (k) fmt6d Tu AuMm*Aw4 PemihiUtymaI inO ISO 0 ISO Sta,enbendaof Perin s0 so 0so SLdmAd MO0 0 0 0 200 0 0 0 0 mI O)ScdaS*MJdyTo4dvlQO7 Fewbd_ e 1Se e "