Tanzania - Tax Administration Project

Document of The World Bank Report No: 17713 TA PROJECT APPRAISAL DOCUMENT ONA PROPOSED CREDIT IN THE AMOUNT OF SDR 28.6 MILLION (US$ 40 MILLION EQUIVALENT) TO THE UNITED REPUBLIC OF TANZANIA FOR A TAX ADMINISTRATION PROJECT March 11, 1999 Poverty Reduction and Economic Management Tanzania & Uganda Country Department Africa Regional Office  CURRENCY EQUIVALENTS (Exchange rate Effective March 11, 1999) Currency Unit = Tanzanian Shilling (T Sh) US$1.00 = T Sh 692 FISCAL YEAR July I - June 30 ABBREVIATIONS AND ACRONYMS ASYCUDA - Automated System for Customs Data Management BOT - Bank of Tanzania CAS - Country Assistance Strategy DANIDA - Danish International Development Authority DFID - Department for International development ESAF - Enhanced Structural Adjustment Facility (IMF) EDP - Electronic Data Processing EU - European Union FARAH - Financial Accounting, Reporting and Auditing Handbook FINNIDA - Finnish International Development Authority GDP - Gross Domestic Product GOT - Government of Tanzania GTZ - German Technical Cooperation IBRD - International Bank of Reconstruction and Development IDA - International Development Agency ICB - International Competitive Bidding ICR - Implementation Completion Report IFC - International Finance Corporation IMF - International Monetary Fund IRD - Inland Revenue Department ITA - Income Tax Act ITD - Information Technology Department LCB - Local Competitive Bidding LTCM - Large Taxpayer Collection Module MOF - Ministry of Finance MIS - Management Information System NBF - Not Bank Financed NIS - National or International Shopping NORAD - Norwegian International Development Authority PAD-MOF - Policy Analysis Division, Ministry of Finance PAYE - Pay As You Earn PHRD - Policy and Human Resources Development PCU - Project Coordination Unit PIP - Project implementation Plan PMRs - Project Management Reports PPF - Project Preparation Facility PSI - Pre Shipment Inspection QBS - Quality Based Selection QCBS - Quality and Cost Based Selection RPD - Research & Policy Department of TRA SAC - Structural Adjustment Credit SIDA - Swedish International Development Authority TAP - Tax Administration Project TAID - Tax Audit and Investigations Department TIC - Tanzania Investment Center TIN - Taxpayer Identification Number TOR - Terms of Reference TRA - Tanzania Revenue Authority UK-DFID - UK Department for International Development USAID - United States Agency for International Development VAT - Value Added Tax Vice President: Callisto E. Madavo Country Director: James W. Adams Sector Manager: Peter Miovic Task Team Leader: Rakesh Nangia  Tanzania Tax Administration Project Contents A. Project Development Objectives Description ......................................................................... 1 Project Development Objectives ...............................1............... .......... I Project Components ... 2 Benefits and Target Population ....................2........................ .... 2 Institutional and Implementation Arrangements ..................................................................... 2 B. Project Rationale ............................................................................ 3 CAS Objectives ..................................3............................................ ....... 3 Main Sector Issues and Government Strategy .....................................................3................. 3 Sector Issues ............ ..................................................................................................... 4 Project Alternatives .......................................................................... 4 Related Projects ............................................................................................................ 5 Lessons Learned ....... ..................................................................................................... 5 Indication of Borrower Commitment ........................ ..... 6 Value-Added of Bank Support ...................6............................................ ....... .... 6 C. Summary Project Assessments ............................................................................. 6 Fiscal Impact ............................................................................................................ . .. 6 Technical Assessment .......................................6......................... 6 histitutional Assessment ................................................................................................... 6 D. Sustainability and Risks ............................................................................. 7 Sustainability ............................................................................. 7 Critical Risks .............. ................................................................................................ 7 Possible Controversial Aspects ........... 8 E. Main Loan Conditions ........................................................................... 8 Effectiveness Conditions .............................8............................................ 8 Other ... 8 F. Compliance with Bank Policies ............................................................................ 9 Annexes: Annex 1: Project Design Summary Annex 2: Detailed Project Description Annex 3: Estimated Project Costs Annex 4: Cost-Effectiveness Analysis Summary Annex 5: Financial Summary Annex 6: Procurement and Disbursement Arrangements Annex 7: Project Processing Budget and Schedule Annex 8: Documents in Project File Annex 9: Statement of Loans and Credits Annex 10: Country At a Glance MAP  INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT INTERNATIONAL DEVELOPMENT ASSOCIATION Africa Regional Office AFTM2 Project Appraisal Document Tanzania Tax Administration Project Date: March 11,1999 [1 Draft [X1 Final Task Manager: Rakesh Nangia Country Director: James W. Adams Project ID: TA-47761 Sector: Public Sector Management Lending lnstnment: Specific Investment Loan PTI: [ Yes [X1 No Project Financng Data [ Loan [X1 Credit [] Guarantee [] Other [Spedcfy] For Loans/Credits/Others: Amount (US$m/SDRm): US$ 40 m./28.6 m. Proposed Terms: [X] Multicurrency [ Single currency Grace period (years): 10 years [] Standard Variable [ Fixed [] LIBOR-based Years to maturity: 40 years Commitment fee: 0.50% Service charge: 0.75% Financing plan (JS$m): Source Local Foreign Total Government 7.0 7.0 IBRD/IDA 10.4 29.6 40.0 Other Donors (DANIDA, DFI), EU, FINNIDA, SIDA) 3.6 19.6 23.2 Total 21.0 49.2 70.2 Borrower: Government of Tanzania Guarantor: N/A Responsible agency(ies): Tanzania Revenue Authority, Ministry of Finance Estimated disbursements (Bank FY/US$M): 2000 2001 2002 2003 2004 Annual 7.6 12.8 9.4 6.9 3.3 Cumulative 7.6 20.4 29.8 36.7 40.0 Expected effectiveness date: 07/01/1999 Closing date: 6/30/2004 Block 1: Project Description 1. Project development objectives (see Annex I for key performance indicators): The project seeks to assist the Govermment of Tanzania (GOT) in raising its tax revenues without increasing tax rates by: (i) improving the legal framework; (ii) broadening the tax base; (iii) strengthening the Tanzania Revenue Authority (TRA) to increase the efficiency and effectiveness of tax administration; and (iv) improving the administrative infrastructure.  Project Appraisal Document Page 2 Country: Tanzania Project Title: Tax Administration Project 2. Project components (see Annex 2 for a detailed description and Annex 3 for a detailed cost breakdown): Component Category Cost Inci. % of Total Contingencies (US$M) (i) Improving the Legal Framework by updating, amending, Institution building 0.8 1.3 consolidating and where necessary, enacting laws and regulations for taxes and customs; introducing a regulatory framework for the Taxpayer Identification Number (TIN); and supporting the establishment of harmonized appeals machinery; (ii) Broadening the Tax Base by increasing the number of registered Institution building 18a 2.8 taxpayers; rationalizing the number of deductions, exemptions and concessions granted by the tax laws; and identifying new sources of revenue and new areas expanding the tax base; (iii) Strengthening the Institution by introducing modem management Institution building 37.7 59.2 systems to all TRA departments, improving training and revisiting the incentives/performance structure. Specifically, this component will focus on improving tax collection through: (a) process re-engineering and computerization of the three revenue departments and TRA support departments; (b) improving the recovery of tax arrears; (c) improving the control of tax evasion; and (d) facilitating voluntary compliance; (iv) Improving the Administrative Infrastructure by rehabilitating, Institution building 20.5 32.2 refurbishing and equipping existing tax offices/customs faclhties and by constructing a limited number of new facilities; and (v) Project coordination & Implementation, including project Project Management 2.9b 4.5 management Project preparation activities have been financed by a Project Preparation Facility of US$1.9 million and other donor activities. Total 63.7 100 Price Contingency 6.5 Total Project Cost 70.2 3. Benefits and target population: The major benefits from the project would be: (i) qualitative improvements in tax administration with respect to transparency, effectiveness and assistance to taxpayers; (ii) increased tax revenues; and (iii) measurable improvements in control and monitoring compliance. The target population is the taxpayer and the tax administration agency. 4. Institutional and implementation arrangements: Implementation period: FY 2000-2004 Executing agency(ies): Tanzania Revenue Authority. Project coordination: A Project Coordination Unit (PCU) will be created wiffin TRA with primary responsibility for coordination within the various departments responsible for implementation. Project oversight: Ministry of Finance. a includes PPF amount of US$ 0.73 million b includes PPF amount of US$ 1.17 miflion  Project Appraisal Document Page 3 Country: Tanzania Project Title: Tax Administration Project Accounting, financial reporting and auditing arrangements: The project accounts will be integrated into the TRA accounting system and Accounting Unit of TRA reporting to the Commissioner of Finance who will coordinate project accounting, maintain overall records, manage disbursements, and produce the project management reports, annual project accounts and ensure their timely audit. The audit will also include a separate opinion on the eligibility of expenditores disbursed on the basis of Project Management Reports (PMR). The external audit of Tax Administration Project (TAP) is to be conducted by the Auditor General or professional auditors approved by the Auditor General. Auditing arrangements were agreed upon at negotiations. The Bank's Financial Reporting and Auditing Handbook would be used by the auditors in accordance with the Bank's auditing guidelines. Audit reports will be furnished to the Bank within six months after the close of TRA's financial year. There are no audits of other IDA funded credits outstandfig in the sector. Assessment of Project for PMR-based disbursement: A detailed review of the proposed financial management arrangements was conducted during the appraisal to assess adequacy and readiness of the project to operate the revised disbursement procedures under the Loan Administration Change Initiative (LACI). This review was based on the Bank's guidelines for "Review of Financial Management System", and focused on the assessment of TRA accounting system as well as the format and contents of the PMRs to be submitted by the TRA in support of withdrawal applications. TRA has in place adequate financial management systems that can provide, with reasonable assurance, accurate and timely information on the status of the project, consistent with the Loan Administration Change lnitiative (LACI) disbursement (i.e. periodic disbursement based on regular submission of project management report) required by the Bank/lIDA. A separate report of this review has been prepared and made available. The project Operational Manual with details of the PMR financial reporting format and the initial deposit to the Special account were finalized and agreed upon at negotiations. The main features of the financial assessment are detailed in Annex 5, financial summary. Monitoring and Evaluation arrangements: Monitoring of project execution will be undertaken by the PCU. The Bank will monitor implementation through periodic supervision missions and review of quarterly implementation progress reports prepared by the PCU based on LACI Project Management Reporting format. The PCU will provide to the Bank an Annual Work Plan no later than February 28 of each year, beginning in 2000. Thepreparation ofthefirstAnnual Work Plan covering July 1999-June 2000, satisfactory to IDA is a condition of effectiveness. Annual Reviews of the project will be conducted by the PCU no later than March 31 of each year, starting in 2000. In addition, TRA will submit to the bank monthly revenue collection reports, quarterly performance reports and special reports such as progress on the customs reform program. Block 2: Project Rationale 5. CAS objective(s) supported by the project Document number and date of latest CAS discussion: Report No. 16554-TA, June 20, 1997 The Country Assistance Strategy (CAS) recognizes that macro-economic stability is critical to attaning the GOT's goal of rapid and sustained growth. The CAS emphasizes the need for building much needed capacity in areas critical for sound economic management, specifically in TRA. Furthermore, by strengthening tax administration, the project would improve revenue performance and increase domestic resources, on a sustainable basis, to finance budgetary needs. The additional resources would also contribute to more sustainable public investment and social sector expenditures. Finally, the project is expected to facilitate tax policy reforms aimed at eliminating provisions that create distortions in economic decision making. 6. Main sector issues and Government strategy: Issues: Macro: Since 1992, Tanzania has faced serious fiscal problems arising from the gap between stagnant revenues and public expenditures swollen by large outlays on administration. The fiscal deficit, after grants, was 5% of GDP in FY94. It rose to 7.9% of GDP in FY95 and remained at these high levels until the first half of FY96. The large budgetary shortfall, together with the quasi- fiscal deficit have been the main forces driving inflation and the growth of domestic debt The former, fueled by the deficit-induced expansion of money supply has averaged 25% between 1994-96. The latter is now equal to 11% of GDP. Tax Revenue collection reflects both the structure of the tax system and deficiencies in tax administration. Tanzania's tax revenue ratio at 12.4%' percent is among the lowest in the region. Structure: Notwithstanding the introduction of several recent measures (including a new investment act in 1997 and the ' Averages of the latest two years (1996/97 and 1997/98). Comparable ratio for some other countries in the region are: Kenya 24.1, South Africa 26.2, Uganda 10.8, Zambia 17.5 and Zimbabwe 25.5.  Project Appraisal Document Page 4 Country: Tanzania Project Title: Tax Administration Project introduction of VAT in 1998), further reforms to simplify and rationalize the tax regime are necessary. This includes reforming the complex (11 band) rate structure of personal income tax, rationalizing and closing loopholes in the area of corporate income taxes including exemptions, and simplifjing the excise system. Administration: Tax evasion is endemic mainly as a result of: (i) institutional weaknesses in the TRA including technical/managerial competence, lack of equipment, poor infrastructure, antiquated business processes, weak tax audit and investigative functions; and (ii) virtually no incentives for voluntary compliance or sanctions (e.g. criminal prosecution) for non- compliance. The Customs Service continues to suffer from: institutional weaknesses related to poor management; weak human resources; cumbersome documentary requirements coupled with bureaucratic and discretionary paper-based procedures; ineffective enforcement practices which rely largely on physical inspection despite the presence of Pre-Shipnent Inspection (PSI); lack of physical infrastructure and equipment, and an outmoded legislativelregulatory base with inadlequate authority and penalty structures contributaing to widespread under-reporting and evasion. In addition, significant rev enue leaks take place along its many porous borders and especially due to the lack of a comprehensive PSI in Zanzibar. While tie GOT is also taking steps, such as considering steps to impose control of transportation of transit fuel by road, using tax stamps for cigarettes, and negotiating means of border control with neighboring countries, much more remains to be done. Government Strategy: The GOT has initiated an ambitious program of public sector reform focusing on, inter-alia, civil service reform, public expenditure reform, and private sector development. Together with expenditure control, reform of tax administration is perhaps the single most important macro-policy issue facing the government. Tax administration is thus a key element in the Government's strategy for increasing tax revenue as well as decreasing economic distortions and promoting the transparency oftax and customs collection. It is also a requirement for successful implementation of the International Monetary Fund (DIF)-supported Enhanced Structural Adjustment Facility (ESAF), as well as for continued donor balance of payment support. While the Government has taken several initial steps (see section 11) towards strengthening tax administration, much remains to be done. On the policy framework the Government continues to consult actively with the IMF and is in the process of addressing many weaknesses in both tax and customs. It is also consulting with the Foreign Investment Advisory Service (FLAS) on redefining the role of the Tanzania Investment Center (TIC) and rationalizing the benefits offered to investors which are recognized to be the single largest source of revenue loss. Onthe administration side, the Government has been receiving support from the World Bank and several donors on various aspects, including recommendations for creating and organizing TRA, implementation and expansion of Automated System for Customs Data Management (ASYCUDA), introduction of Value Added Tax (VAT), incorporation and pilot testing of the Taxpayer Identification Number (TIN), development of an InformationL Systems (IS) strategy, and preparation of an institutional strengthening needs and plan. Implementation ofthe proposed program over the next five years constitutes a key element of the Govermment strategy in this area. 7. Sector issues to be addressed by the project and strategic choices: The project objective of increasing Govermnent revenues is central to Tanzania's development objectives and consistent with the Bank's CAS. The project will simultaneously contnbute to a strengthening of Tanzania's prevailing weak public sector institutions and management. It would address major shortcomings in tax administration by expanding the tax base, amending and consolidating the legal framework, modermizing collection and audit procedures, and strengthening the institutional framework for enforcement. Priorities for the first year include improving the taxpayer registry, strengthening tax collections through re-engineering the process and automation, review of the TRA organizational structure, review and consolidation of the relevant tax laws, conducting a baseline taxpayer survey, and begin capacity building efforts. 8. Project alternatives considered and reasons for rejection: The main strategic choice considered by the Government was to continue reforms through incremental measures as opposed to a more fundamental and fast-paced strategy. The GOT, with the establishment of TRA as a quasi-autonomous executive agency, opted for the more radical, higher-risk strategy, in part because serious doubts were expressed early about the ability of TRA to retain qualified personnel within the government bureaucracy. In addition, the need to increase revenues on a sustainable basis is urgent The other main strategic choice considered was to be all-inclusive and cover the tax administration of the local government. However, it was felt that this would not only delay much needed reform, but it could also undermine its effectiveness because of its ambitious nature. Local govemment reform is in its infancy and discussions on inter-governmental fiscal relationships have yet to begin. In addition, a strong central agency to support future efforts of local governments would still be necessary.  Project Appraisal Document Page 5 Country: Tanzania Project Title: Tax Administration Project Finaly, privatization of customs was considered, but it was thought to be too radical a change at this point. It was felt that any more changes to TRA could increase resistance to change, which would operate to the detriment of the entire tax reform effort. In addition, Pre-shipment inspection (PSI) is currently in operation and negotiations for extending PSI for another 2 years have been completed. 9. Major related projects financed by the Bank and/or other development agencies (completed, on-going and planned). Sector Issue Project Latest PSR Ratings IP DO Bank-financed Customs Reform Second Ports Modernization S S (ongoing) Support for VAT Parastatal and Public Sector Reform S S (ongoing) Private sector development Private Public Sector Management S S (ongoing) Privatization and Public Sector Management (planned) Second Structural Adjustment Credit (planned) Tax Administration TRA Organizational Establishment (IDF) (completed) Project Preparation Facility (ongoing) Reform of civil service Civil Service Reform (planned) Other development agences DANIDA Tax Administration Danish Government Assistance to TRA (Organizational set-up) (completed) DFID Tax Administration U.K Assistance to TRA (TRA Support Project) (ongoing)) USAID Tax Administration Assistance to strengthen TRA (ongoing)) EU, FENNIDA and World Bank Tax Administration VAT support (completed; EU on-going) UNDP and World Bank Customs Reform ASYCUDA (ongoing) SIDA Tax Administration TRA Human Resources Development Project (ongoing) GTZ Tax Administration Income Tax Project (ongoing) 10. Lessons learned and reflected in the project design: Lessons learned from previous tax administration projects which are reflected in the project design include: (i) need for political commitment to the reform and active support for its implementation; (ii) appropriate emphasis on organization, business process, human resource selection, pay and training issues and avoidance of an overemphasis on information technology; (iii) competent leadership in implementation and close supervision by GOT; (iv) focus on voluntary compliance through improvements in legal framework, administration and the quality of services, and fair grievance redressal; and (v) mechanisms to enhance the transparency  Project Appraisal Document Page 6 Country: Tanzania Project Title: Tax Administration Project and accountability of tax administration such as taxpayer registration number, prioritization of assessment, investigation and collection activities, and an effective public relations campaign to educate taxpayers regarding their legal obligations. Lessons leamed from other operations in Tanzania include: (i) the need for close project supervision which is facilitated in this case by the transfer of project preparation and supervision to the Resident Mission; (ii) the need to assure adequate counterpart funding, which is facilitated by instituting advance payment of a portion of the Government's contribution in the project account and institution of an appropriate revenue retention scheme.; and (iii) close donor cooperation which has resulted in the donors working towards a program approach and focusing on a conceptual framework within which interested donors can contribute. 11. Indications of borrower commitment and ownership: The strength of the Government's commitment is demonstrated by: (i) creation of TRA in 1996; (ii) introduction of VAT; (iii) preparation of several strategic plans with Donor and Bank support, such as a comprehensive TRA corporate plan, an Information Systems Strategy, Customs Reform Plan; (iv) continued restructuring of TRA -- more than 1100 staff (about 27%) who did not meet standards of integrity were laid off; (v) preparation for introduction of Taxpayer identification numbers; (vi) introduction of a computerized system (ASYCUDA) in the Dar Es Salaam airport and seaport; (vii) h armonization of tariffs between mainland and Zanzibar; (viii) continuation of Pre Shipment Inspection (PSI) for at least 2 more years; (ix) institution of "hot-lines" and other mechanisms focusing on customer service; and (x) strengthening of the internal investigation unit. 12. Value added of Bank support: The Bank is centrally involved, both because of the Government's desire to benefit from the Bank's international experience in tax administration and because the GOT has, in the past, relied heavily on the Bank's advice in the steps undertaken so far. The Bank is playing a key role in helping TRA develop the framework within which the anticipated donor-financed efforts will be agreed. Finally, Bank participation will play a catalytic role in initiating and supporting the reform which involves wide-ranging organizational changes. Block 3: Summary Project Assessments (Detailed assessments are in the project file. See Annex 8) 13. Economic Assessment [] Cost-Benefit Analysis: N/A [] Cost Effectiveness Analysis: N/A [X] Other: (see Annex 4): Fiscal Impact Fiscal impact: The project is expected to have a positive fiscal impact resulting from administrative reforms aimed at improving effectiveness in tax administration. While some improvements may be expected from the start-up phase of the project in FY2000, it is conservatively estimated that the reforms will result in a permanent increase in tax revenues of about 1% of GDP by 2002 and more than 2% of GDP by 2004. These projections reflect increases due to overall economic growth, adminirstrative and policy changes in VAT, customs measures (such as tightening of the borders, harmonization of tariffs), and the impact of reforms in income tax including reduced collection of arrears, TIC exemptions, petroleum windfall taxes and increased efficiency of collection. 14. Financial Assessment: Not Applicable 15. Technical Assessment: The project will finance institution building, physical infrastructure, vehicles, computers, telecommunications equipment and software. Substantial inputs from international consultants will be required to support the departments responsible for the implementation of the project Steps are being taken to ensure that local counterparts are in place. The TRA has developed an Information Systems (IS) Strategy, which includes hardware and software architecture standards to ensure con sistency with the re-engineered processes and eventual dovetailing of software across the revenue and non-revenue departments. 16. Institutional Assessment: Executing agencies: The TRA will be the executing agency. A Steering Committee chaired by the Commissioner General and composed of heads of the major departments (Human Resources and AdministratiojnL Finance, Information Technology, Income Tax, Director of Research and Policy) and the Project Coordinator will report to the TRA Board at least quarterly. The Steering Committee  Project Appraisal Document Page 7 Country: Tanzania Project Title: Tax Administration Project will be supported by the PCU. Project management: The PCU would be directed by a permanent project coordinator with substantial international experience in the field of tax administration. The process to identify key staff has started. 17. Social Assessment: Not Applicable 18. Environmental Assessment: Environmental Category [ A [I B [XI C 19. Participatory Approach: Identification/Preparation implementation Operation Beneficiaries/community groups Collaboration (COL) COL COL Academic institutions Consultation (CON) COL COL Other donors COL COL COL Chambers of Commerce and Industry CON CON CON 20. Sustainability: By supportig a comprehensive tax and customs administration reform in conjunction with improved enforcement and voluntary compliance, the project will help the GOT establish a sustainably higher and more predictable level of revenues. The strong institution building component of the project is aimed at ensuring sustainability over the medium-term; Government commitment to on-going strengthening is necessary for long-term sustainability, specifically with respect to assuring full funding of TRA's operational budget, thus pennitting TRA to hire, motivate and retain qualified staff and, in particular, senior management 21. Critical Risks (see fourth column of Annex 1): Project outputs to development objectives Risk Risk Rating Risk Minimization Measure TRA's ability to: (i) attract and retain qualified staff; S Appropriate recruitment, remuneration, staff evaluation and (ii) manage the change process. (including sanctions) and training policies will be implemented to ensure that TRA remains competitive. A training program covering all revenue-related functions will be organized to enhance the ability of managers and staff to implement and sustain the reforms. Efforts to communicate the changes and build broad-based ownership to the refornns will continue. Potential opposition from within the private sector. N Mitigated by appropriate public information dissemination and communication strategies and assuming continuing GOT/private sector discussion. A project launch workshop will include a cross-section from the private sector Project components to outputs Risk Risk Rating Risk Minimization Measure Insufficient counterpart funds H Initial deposit of GOT's contribution to be about $400,000 equivalent (6 months estimate). Revenue retention scheme to be considered at the review scheduled for December 2000. Weak capacity to coordinate interrelated tasks and H International and local consultants will be hired to help both supervise consultants effectively. implement the various project components and build capacity with their TRA counterparts. A carefully phased work plan will be developed to ensure that changes are in step with organizational strengthening.  Project Appraisal Document Page 8 Country: Tanzania Project Title: Tax Administration Project The process of approval of revised legislation is N delayed Incompatible information systems across revenue S To assure a standard system architecture is in place, an IS departments. Strategy for TRA was prepared under the PPF and has been adopted by the Board in October 1998. The first step towards implementation is the completion of the process re-engineering study. Delays to improvements to the infrastructure. M Addressed l&rough the preparation and monitoring of annual infrastructure improvement plans. Disbursement projections are ambitious. Unfamiliarity M TA has beec provided to the PCU. Disbursement performance with Bank projects may delay disbursement initially. will be revieDwed annually and targets revised if necessary. Preparation and supervision of the project has been relocated to the Resident Mission. Overall project risk rating S 22. Possible Controversial Aspects: The Bank has initiated discussions on integrity in Tanzania at the highest level of goivermment Integrity is an issue which may prove controversial for several projects in Tanzania. Activities under this project will follow guidelines to be formulated and adopted by the GOT, with Bank support The TRA, with the firing of more than 1100 staff in 1996, has established a reputation in Tanzania for aggressive action on corruption. In response to the Warioba Report, a TRA Action Plan to combat corruption was prepared and implementation is monitored by the TRA Board. An internal investigation unit has been established in the Internal Audit Department. One of the functions of this department is to ensure integrity amongst its staff. There is a media campaign in the press and on television, supported by telephone hotlines and the provision of rewards to informants. Nonetheless, the TRA is well aware of the invasive nature of the problem, especially in the Customs. A recent (August 1998) survey confirmed continued public concern with integrity in the TRA and the Customs in paricular. Private sector and other beneficiaries of the existing tax regime may mobilize and begin to oppose the proposed reforms. Block 4: Main Loan Conditions 23. Effectiveness Conditions: * Appointment of all PCU personnel; * Preparation of Annual work plan (covering July 1999 - June 2000) and Project Implementation Plan satisfactory to the Bank * Submission to IDA of draft TORs for all consultancies to begin in the first year of implementation. * Establishment of a TRA Project Account to account for advance six-monthly Government counterpart fund payments. Initial deposit to be US$400,000 equivalent. * Approval by the TRA Board ofthe on-going review ofthe organizational structure and an agreed timetable for implementation of the recommendations. The review is expected to be completed by March 31, 1999. * Finalize proposals and timetable on the establishment of the Harmonized Tax Appeals Machinery. 24. Other: * The agreed performance indicators with linked annual revenue targets for all three revenue departments and the major operational departments (Annex 1, PAD), to be monitored by the TRA Board on a quarterly basis; * LACI Project Management Reports (PMR) to be used (components and first year's budget), including the annual accounts and audit arrangements;  Project Appraisal Documnent Page 9 Country Tanzania Project Title: Tax Administration Project * The PCU wiU provide (a) quarterly project implementation progress reports to the Bank; (b) a draft Annual Work Plan for the upcoming fiscal year by end-February of each year for Bank no objection; (c) conduct a detailed program implementation review together with the Bank/donors by December 31, 2000, (d) a Mid-term Review of the program together with the Bank/donors by June 30, 2002; and (e) prepare the Implementation Completion Report within six months of the completion of the project; * Operational Manual agreed with the Bank and accounting and monitoring systems acceptable to the Bank; * For the Improved Legal Framework, presentation to Parliament of amendments to the TRA Revenue Authority Act, the administrative and procedural provisions of the tax laws and other laws related to tax and customs, as agreed with the Bank by December 31, 2000; * For the Broadened Tax Base component, presentation of Strengthened Regulatory Provisions to Parliament by December 31, 1999; * Design of streamlined process and revised departmental guidelines for duty-drawback in line with ESAF timetable. Block 5: Compliance with Bank Policies [x ] This project complies with all applicable Bank policies. [ ] [The following exceptions to Bank policies are recommended for approval: The project complies with all other applicable Bank policies.] , Task Team Leader: ,/ cor Manager: iDrector: f Rakesh Nangia Peter Miovic James W. Adam  Project Appraisal Document Page 10 Country: Tanzania Project Title: Tax Administration Project Annex 1 Tanzania Tax Administration ProJect Project Design Summary Narrative Summary Key Performance Indicators M!onitoring and Critical Assumptions and Supervision Risks CAS Objective Fiscal stabilization and Reduce fiscal deficit and increase budget Supenrision missions and Government commitment Strengthening expenditures on infrastructure and social ESAF implementation to economic reform sectors in line with IME ESAF targets. missions and IMP annual program __ _ _ ____ country report. Project Development Objectives 1. Improve effectiveness Tax Effectiveness indicators: and efficiency of tax 1.1 Tax gap: TRA EBoard Quarterly Sustained Government and Customs Baseline: 23% Report. commitment to administration. 2002: 17% strengthening TRA. 2004: 8% 1.2 No of Declaration/Registered Taxpayers: Income Tax: Annual Continued appointment of Base line: 89% VAT: Quarterly able senior management 2002: 95% 2004: 95% No GOT interference in 1.3 On-time declarations/Total declarations Income Tax: Annual TRA operations beyond the Baseline: 72% VAT: Quarterly powers defined in the 2002: 80% current act. 2004: 90% 1.4 Arrears recovered/BoY arrears: Annual reports Baseline: 50% 2002: 85% 2004: 95% Efficiency Indicators: 1.5 Registered Taxpayers per employee: Quarterly reports Baseline: 73 2002: 81 2004: 90 1.6 Collections per Employee: Quarterly reports Base line: 192 2002: 253 2004: 338 1.7 Tax arrears as % of Annual Revenue Annual reports Collection: Baseline: 13% 2002: 10% 2004: 8% 2. Increase Tax revenues 2. Tax revenues/GDP: 2. Fiscal Accounts: Annual Review targets in Baseline: 12.4% December 2000. 2002: 13.3% 2004: 14.8%  Project Appraisal Document Page 11 Country: Tanzania Project Title: Tax Administration Project Project Outputs General: Supervision missions, Bank clearance to contract proposals, audits, and reports. Specific: 1. Strengthened 1.1 Actual Recruitment completed/planned 1. Internal reports and TRA's ability to attract and organization and 2002: 900/0 Personnel records retain qualified staff. management of tax 2004: 95% administration. 1.2 Actual training completed/planned: Management ofthe 2002: 70% "change" process. 2004: 900/0 1.3 Improved infrastructure -- complete: Mapato House: 12/00 Kipata House: 12/00 Zanzibar : 9/01 Samora Ave: 3/02 Arusha : 8/03 All border posts :By 1/02. 2.1 Re-engineered, computerized operations: 2. Internal reports Customs: 2001 VAT: 2001 IncTax: 2002 2.2 No of TINs allocated: Baseline: 11,700 2002: 200,000 2004: 300,000 2. Improved tax and 2.3 ASYCUDA Rollout plan: Compatibility of customs collection Zanzibar: 9/99 information systems across procedures Tunduma & Kasumulu: 12/99 revenue departments. Kilimanjaro & Kigoma: 6/00 Completion and Mtwara, Namanga, Horohoro: 6/00 rehabilitation of civil Sirari, Holili, Mutokula: 6/01 works. Tanga, Kabanga, Rusumo: 12/01 Mwanza: 3/02 2.4 Clear documents through customs: Baseline: 40% cleared in 24 hours 2002: 80% 2004 95% 3. Enhanced voluntary 3.1 Harmonized appeals machinery 3. Quarterly and annual compliance operational by 6/99. reports. 3.2 Introduction of Self-Assessment system Effectiveness of grievance for Income Taxes by 1/01. and intemal investigation 3.3 Timely VAT refunds: units. Baseline: 70% within 1 month 6/00: 100% 3.4 Amounts collected directly through banks: Baseline: 30% 2002: 60% 2004: 90%  Project Appraisal Document Page 12 Country: Tanzania Project Title: Tax Administration Project 4. Control of tax evasion 4.1 System of audits and procedures defined 4. Internal Reports. by 6/00. 4.2 Revenue recovery as % of Taxes Willingness of taxpayers to identified: provide information. Baseline: 26% 2002: 40% Cases processed quickly. 2004: 60% Potential opposition from the private sector (beneficiaries of the current system). Project Components (Components to Outputs) See Annex 2 for details 1. Improved Legal $ 0.8 million Legal publications Insufficient counterpart Framework funds. 1.1 Revised laws Parliamentary delays to 1.2 TIN Regulatory legislative approval. framework 1.3 Harmonized appeals machinery 2. Broaden Tax Base $ 1.8 million Internal Reports 2.1 TIN design, testing and production 2.2 Review of potential sources for revenue for expanding the tax base 2.3 Surveys to expand registration. 3. Strengthen $ 37.7 million Internal Reports Scarce capacity to Institution coordinate interrelated 3.1 Income Tax dept tasks. 3.2 Customs dept 3.3 VAT dept 3.4 Tax Audit and Investigation dept. 3.5 IT dept 3.6 HR and Finance dept. 3.7 Research and Policy dept 3.8 Internal Audit dept 3.9 Taxpayers education dept 3.10 Legal Services dept. 4. Administrative $20.5 million Interal Reports Infrastructure 5. Project coordination $2.9 million * Tax gap is the difference between the (estiinated) potential tax revenue that shcould be collected given the existing tax structure and the amount actually collected. * Arrears Recovered/BOY Arrears: The percent of the stock of arrears brought fbward at the beginning of year that is recovered during the year.  Project Appraisal Document Page 13 Country: Tanzania Project Title: Tax Administration Project Annex 2 Tax Administration Project Detailed Project Description Background: Prior to 1995 revenue collection was done by the Tax department under the Ministry of Finance. Weaknesses and problems in the previous tax administration such as inadequate revenue collection, inadequacies in tax policy, poor tax administration led to the establishment of an autonomous tax administration body, the Tanzania Revenue Authority (TRA) operating outside the traditional Civil Service framework. The TRA act was effective on August 1995 and TRA started operations a year later as an Executive Agency responsible for assessing, collecting and accounting for revenue on behalf ofthe GOT, administering as well as enforcing tax laws, providing advice to the government on fiscal policy and its administration and developing an efficient and fair tax regime. TRA Performance: TRA has made considerable progress in improving and strengthening efficiency in revenue collection since it was established. Various measures taken by both the government and TRA after the establishment of the authority have made a signifficant impact on revenue collection over the past two financial years (1996/97 and 1997/98). Actual revenue collected in FY 97 was 97% of the estinated target and 26% higher than revenue collected in the previous FY. Similarly, actual revenue collected in FY 98 was 88% of the target and 12% higher than revenue collected in the previous year. Apart from increased revenue collection, TRA introduced VAT on July 1, 1998 which has resulted in exceeding revenue collection targets and also fulfilling ESAF benchmarks. Project Component 1 - Improved Legal Framework, US$0.8 million TRA administers about 20 revenue related laws. Most of these were enacted many years ago and have not been revised. Over the years amendments have been made but these have not been consolidated. Tax statutes are not easily available to both tax payers and collectors. There is a need to review the laws to ensure that they reflect the socio-economic and other changes that have taken place in the country. In addition, the current tax appeals system is ineffective and non-transparent and needs to be revised. This component will help: * update and modernize tax/customs laws and regulations; * improve compliance by rationalizing the laws and simplifying procedural requirements; * facilitate enforcement, including reviewing the adequacy of enforcement provisions; and * the establishment of harmonized tax appeals machinery. Subcomponent A: Review and consolidation of tax laws The following laws have to be updated, revised, harmonized and some of them will be consolidated: * The Income Tax Act, 1973 * The Customs Tariff Act, 1976 * The Excise Tariff Ordinance (Cap.332) * The Stamp Duty Act, 1972 * The Road Toll Act, 1985 * The Hotel Levy Act, 1972 * The Car Benefit Tax Act, 1991 * The Port Service Charges Act, 1973 * The Airport Service Charge Act, 1973 * The Motor Vehicle (Tax on Registration and Transfer) Act, 1972 * The East African Customs Management Act, 1976 * The Traffic (Foreign Vehicle Rules) Act, 1973 * Customs and Excise Management Act, 1997 * East African Excise Management Act, 1970 * The Housing Levy Act, 1985 * The Customs and Excise Management Act, 1977 * East African Community Mediation Agreement Act, 1987 * The Value Added Tax Act, 1997 * Business Licensing Act * Foreign Vehicles Transit Charges Act, 1995  Project Appraisal Document Page 14 Country: Tanzania Project Title: Tax Administration Project Subcomponent B: TIN regulatoryframework Since there is no TIN system in place at the current time, the existing framework does not provide for a TIN concept The relevant laws will be amended to provide for mandatory use of the TIN. Subcomponent C: Establishment of Harmonized Tax Appeals Machinery * Review the appeals provisions in the tax laws with a view to harmonize them. * Support the creation and operation of harmonized tax appeals machinery includling the creation of harmonized Appeals Tribunals and Commercial Courts. Project Component 2 - Broaden Tax Base, US$1.8 million Tanzania has a relatively small number of taxpayers, and collects a disproportionately large share (75%) of its tax revenues from the Dar Es Salaam region. The TRA intends to broaden the tax base through: * the introduction of a taxpayers identification number system and strengthen its presence and revenue perfornance outside of the capital; * rationalize the number of deductions, exemptions and concessions granted by the tax laws; * introduce taxes (where appropriate) in areas of economic activity currently not taxed. SubcomponentA: TiN -PPF Design, testingandproduction Subcomponent B: Review of potential new sources of revenue and areas for tax base expansion by RPD together with MOF. Undertake surveys to collect and utilize information available with GOT agencies and third parties to detect potential taxpayers and introduce cross-agreements on the transfer of infonnation. Subcomponent C: Printing of drivers licenses Project Component 3 - Strengthen Institution, US$37.7 million TRA's resources are thinly spread over a large number of activities. This component will help strengthen the management and operating procedures of TRA through the introduction of modemn management and operations systems and training. It will help: * streamline, sinplify and modernize current processes and procedures; - computerize integrated revenue systems to permit increased efficiency, compliance and verification of records; and - improve recovery of tax arrears. To realize these objectives will require improvement in the caliber of its staff (throuigh training, remuneration and other incentives including, inter alia, performance contracts). The strengthened TRA systems will also facilitate greater voluntary compliance by improving the transparency, equity and efficiency of the tax system, and reducing the cost of compliance, inter alia, through increasing the availability of information to the taxpayer and by removing distortions within thLe system. In addition to the simplification of tax laws and the tax procedural requirements (Component 1 above), this will include a review of the tax rates with a view to rationalizing and, where possible, reducing the rates to encourage compliance. The TRA intends to reduce evasion by strengthening its investigation, audit and assessment capabilities through better systems, equipment, improved trainig and both increasing the level and enforcement of sanctions. Subcomponent A: Capacity Building and Technical Assistance: The project will finance long term consultants/advisors with estimated 206 mans months to assist the following departments: Customs Income Tax, Information Technology, Tax Audit and Investigation, Staff Training and Tax Revenue collections. Also it will fiance short term consultants with estimated 158 mans months to assist in VAT management control, tax payers education, research and policy, intemal auditing, communication system and customls and project mid term review. Subcomponent B: Computerization: The project will also support computerization throughout the TRA, excepting the VAT (which was successfully introduced on July 1, 1998) and ASYCUDA which is provided for by existing donor support. With the exception of the VAT and ASYCUDA, TRA's systems are manual.  Project Appraisal Document Page 15 Country: Tanzania Project Title: Tax Administration Project Subcomponent C: Training: TRA staff in all departments are in urgent need of technical, systems and management training. The Board has approved a training strategy, a five year training program and a training plan for the first year of TAP. The training plans underpin the modernization and improvement efforts documented in each department's PIP. TRA's recruitment policy is to appoint graduates and to provide short, practical training within the country and whenever appropriate bring external resources to the country to ensure value for money from international expertise. In addition to job related training, TRA will continue to support a limited number of staff towards the completion of post-graduate qualifications and professional examinations. Income Tax Department: The Income Tax Department has recently initiated a project to streamline and computerize the core procedures. Basic computer training and training in the new processes will therefore be critical. In addition the department is seeking to improve performance through selecting taxpayers for audit based on risk assessment, and Revenue Officers require further training in detailed audit techniques, in particular in respect of computerized accounts and records. During the TAP period, a number of officers will be trained in the administration of VAT in order to support the move to one stop revenue centers, initially at the district level. (Similar cross training is provided for the plans for the other Revenue Departments). The Department has recognized the need for some Revenue Officers to develop an in-depth knowledge of certain industries in order to administer the taxes effectively, and the training plan envisages courses and attachments to achieve this aim. Customs Department: The Customs department retrenched many staff during the establishment of TRA and after the probationary period. As a result, there is a significant need for basic training in procedures as the department transfers and recruits staff to build the necessary complement The Customs plan focuses on large number of staff attending in-country training. The TAP framework envisages significant levels of technical assistance to the department and the consultant's terms of reference will include the design and delivery of training. An example of this will be the implementation of Flexible Anti-Smuggling Teams. A core component of the Customs department PIP is the implementation of the Customs computerized systems, and the roll out of ASYCUDA. Training for all officers who use the new modules of the system will be critical. The PIP also sets out the plan for major improvements to classification and valuation procedures which in tun will require all Customs Officers to undergo training VAT Department: Officers in the VAT Department have received the necessary training for the implementation of the new tax under the current EU training support. However, a major ongoing training program will be necessary to provide skills in control and enforcement as such further fiancing will be necessary from TAP. The current VAT systems implementation focuses on the major regions, and during the TAP period the department will need to provide the necessary training as the systems are rolled out to other locations. The department is also responsible for the administration of a number of other taxes, and there will be a continuing need to train staff. Tax Audit and Investigations Department: A central Tax Audit and Investigations (TAI) Department was set up at the inception of TRA. To date the department has received no training support, and all staff are in urgent need of traiing in tax fraud and investigations, preparation and presentation of evidence for prosecution, and conducting the investigations effectively while treating taxpayers with dignity and respect Many of the taxpayers use computerized system and TAI officers need training to access and interpret computerized information. Some TAI staff will need to specialize in certain sectors in order to develop the necessary in- depth knowledge to detect fraud and evasion. These training requirements will be coordinated with other departments which have identified similar needs. Information Technology Department: In order to support the implementation of the IS strategy, and to ensure that TRA is not reliant on external consultants, the deparlment needs to train its staff in all the technologies and software which TRA will be using. Information Technology is a rapidly changing field and it is important that there is sufficient training to keep staff up to date with -developments. A particular challenge will be the implementation of a data/telecommunications network and a small number of staff will receive training in this specialized field. Human Resource and Finance Department: The needs of this department are diverse and fall broadly in the areas of finance(revenue) and accounting, human resources and training, procurement and office services. Significant trafiing has already taken place to support the implementation of the computerized expenditure accounting system. During the plan period training needs to continue to support the roll-out to the regions. During the TAP period management will review and strengthen the staffimg of the accounting and revenue function, and inevitably there will be a continuing need for training in accounts & revenue procedures and financial management in general  Project Appraisal Document Page 16 Country: Tanzania Project Title: Tax AdrrInistrton Project The Human Resources Division has recruited a number of officers with HR expertise outside the civil service. TRA aims to be a leading employer in Tanzania, and in order to achieve this there is a need to expose the HR officers to best practice approaches. In order to ensure value for money the training plan envisages that external expertise will be brought to the country to provide the training. Key staff in the Procurement and Officer Services division have already received the necessary trafining to equip them for the significant procurement tasks under TAP. The training plan recognizes the need for a small number of staff to receive similar traiing, and also to strengthen the Store function. Research and Policy Department: This department is currently benefiting from USAID funded training support. A similar program is envisaged in the latter part of the TAP implementation to consolidate the department's capacity. A small number of staff will require specialized training in research and corporate planning techniques. Internal Audit Department: This department is a small, specialized unit, and staff have been recruited extemally to ensure the necessary levels of competence. Nevertheless there is still a need to train the staff in the focus and requirements of internal audit, and in particular the audit of computerized systems. Once again the plan for this departmient anticipates that external expertise will be brought to the country so that the maximum number of staff can benefit from the training. In addition internal auditors will require further training in tax administration so that they are better equipped to recommend improvements to procedures and systems. Taxpayer Education DepartmLent: A recent survey of taxpayers illustrated the need for TRA to boost its education program, and to train Revenue Officers so that they treat taxpayers with dignity and respect The Depiartment is crystallizing its plans to establish a nation-wide taxpayer education network so tlat these issues are addressed effectively in all offices. The training plan therefore envisages training for all staff involved which will also provide the vehicle for the design and implementation of a taxpayer education program for TRA. The department will be responsible for an annual survey of taxpayer perceptions, and therefore staff will require training in the design and analysis of surveys. Legal Service Department: The Legal Services Department is a new department. Despite best efforts TRA has been unable to appoint suitable external staff who would require mfinimal training. The Authority has therefore decided to appoint suitably qualified internal candidates, and to provide them with training in the areas of litigation and court procedures to which they were not previously exposed as tax administrators. Much of this training will be provided by external experts who will deliver training courses, followed by on the job coaching. Project Component 4 - Improved Administration Infrastructure, US$20.5 million The TRA inherited a network of tax offices and customs facilities that are in need of major rehabilitation. Of the 26 regional offices, 21 are without water and electricity. The buildings also require substantial upgrading in terms of refurbishment to provide an effective work environment (including the ability to instal and operate modemn technology) and improved facilities for taxpayers. Customs border posts are without communications, secure offices or equipment of any kind. There is a need to construct a limited number of additional buildings in areas where there are no facilities, and in particular, customs border stations. Subcategory A: Procurement of Equipment: The project will support the procurement of motor vehicles, office equipment and furniture, power generators, radio communications and equipment, customs patrol boats and information technology equipment Subeategory B: Improving Buildings/Infrastructure The project will support (i) construction of a new regional office in Arusha; (ii) rehabilitation and modernization of Regional Offices in Kilimanjaro, Mbeya, Morogoro, Mwanza, Tanga, Zanzibar and Pemba; (iii) refurbishment and modernization of Income Tax Headquarters at Mapato House, Sales Tax Headquarters at Kipata House and Sales Tax Offices at Samora House; and (iv) rehabilitation and modernization of selected border/transit stations at 25 locations around the country. Subcategory C: Establishment of Central Library The project will support the setting up of library at TRA headquarters  Projdct Appraisal Document Page 17 Country: Tanzania Project Tift: Tax Administraton Prject Subcategory D: Taxpayer Education Material, Tax Guides and Manual The project will support expenses related to taxpayer education that require printing of pamphlets, advertisements and the printing of new tax laws. Project component 5 - Project Coordination Unit, USS 2.9 mUlion This Unit will provide effective support and efficient management of the project in order to achieve the objectives. Subcategory A: Project Preparation: The assistance includes the TAP project preparation document, technical assistance for architectural survey of buildings to be renovated, miscellaneous consultancies and IS strategy study. Subcategory B: Project Implementation: The project wil1 finance salaries for technical assistants to be recruited in the Project Coordination Unit  Project Appraisal Document Page 18 Country: Tanzania Project Title: Tax Administration Project Annex 3 Tax Reform Project Estimated Project Costs Project Component Local Foreign Total ---- ---$ -l-----USSniion -- ---- 1. Improved Legal Framework 0.1 0.7 0.8 2. Broaden Tax Base 0.1 1.7 1.8 3. Strengthened Institution 10.6 24.6 35.2 4. Improved Administrative Infrastructure 4.8 14.4 19.2 5. Project Preparation & Implementation - 2.9 2.9 Total Baseline Cost 15.6 44.3 59.9 Physical Contingency 1.1 2.7 3.8 Price Contingency 4.3 2.2 6.5 Total Project Cost 21.0 49.2 70.2  Project Appraisal Document Page 19 Country: Tanzania Project Tile: Tax Administration Project Annex 4 Tax Administration Project Cost Effectiveness Analysis Summary (US$ million) Present Value of Flows Fiscal Impact Economic Financial Analysis Analysis2 Taxes Subsidies Project Costs $65.6 million N/A N/A Increase in tax ratio due to improvements in administration alone to 13.3 % of GDP by 2002 and 14.8% by 2004. Summary of Benefits and Costs: The fiscal impact of the project is estimated by projecting increases in the effective tax ratios arising from proposed tax administrative measures. These reflect both the increased efficiency of the TRA to collect and audit, and the estimated impact of the increases in the tax base. A projected scenario is available on file. 2If the diffeicncebetween the pesent va1ue offinancial nad economic flows is large and eansotbe explainedby taxes and sulbidies, a bief explanation ofthe differeneis warranted, e.g., "The diffetnnce between financial and economic costs arises from price controls on the inputs."  Project Appraisal Document Page 20 Country: Tanzania Project Title: Tax Administration Project Annex 5 Tax Administration Project Financial Summary (US$ millions) FY 00 FY01 FY 02 FY03 FY04 Project Costs Investment Costs 17.6 22.1 14.5 10.0 6.0 Recurrent Costs 1.8 4.0 4.0 4.6 3.8 Total 19.4 26.1 18.6 14.6 9.8 Financing Sources (% of total investment costs) IBRD/IDA 7.6 12.8 9.4 6.9 3.3 (43%) (58%) (65%) (69%) (55%/.) Co-financiers 8.7 7.7 3.6 1.9 1.4 (49%) (35%) (25%) (19%) (23%) Govermment 1.3 1.7 1.5 1.2 1.3 (8%) (7%) (10%) (12%) (22%) Total 17.6 22.1 14.5 10.0 6.0 (100%) (100%) (100%) (100%) (100%) Financial Summary Accounting responsibility: TRA will be the executing agency for TAP under the supervision of a Steering Committee composed of heads ofthe major departments and chaired by the Commissioner General. The Steering Committee will be supported by a Project Coordination Unit within TRA which will be responsible for the project implementation, overall project planning, accounting, monitoring and reporting. TAP will operate a Special Account with a reputable commercial bank and all TAP funding will be administered and controlled through the TRA central accounting system. Project accounting and reporting will be integrated into the TRA accounting system -under the Commissioner of Finance. Overview of Financial Management System of TRA Accounting System and Procedures: TRA has a comprehensive accounting system which captures all key activities of TRA including donor funds. The expenditure accounting system is on an accrual basis while revenue accounting is on cash basis. The charts of accounts for both expenditure and revenue accounting are available. The expenditure accounting manual is being updated in order to accommodate the integrated computerized expenditure accounting system. Revenue accounting, which is done manually, is not integrated into the expenditure computerized accounting system. The computerized revenue accounting system to be implemented at a later stage will be able to interface with the current expenditure accounting modules in operation. Periodic accounting reports and quarterly management reports are prepared and submitted to the TRA Board. Computerized Accounting System: The Expenditure Accounting System is being implemeated as an Integrated Financial Management System (IFMS) using Platinum SQL. The system is user friendly and has the following features: (i) ability to account under aU comprehensive basis of accounting both cash, modified cash and accrual; (ii') data from one module can be linked together in a database and changes in one application update information/data in other Platinum S QL applications automatically; (iii) the system has capacity to track the actual data vs. budget, track and search by specific transactions, references; (iv) it has capacity to track report on multiple projects, capacity to interface with government financial management sysiems and capacity to customize various reports; and (v) it complies with year 2000 requirements. The computerization of the expendil.ure accounting phase one which cover the four main cost center in Dar Es Salaam will be completed by March 1999. The second phase will cover computerization and training of the remaining cost centers. The modules already in operation are the general ledger, cash imanagement, accounts payable and receivable,  Project Appraisal Document Page 21 Country: Tanzania Project Tite: Tax Administration Project purchase order, inventory management, multi-currency and Platinum publisher (report writer) modules, budget, fleet management, procurement and fixed asset modules. The reports generated from the expenditure computerized accounting system have been reviewed by a Bank team and found satisfactory. System Backup and Maintenance Support and Security: The system has a adequate backup system and intemal security features which prevent data loss and ensure integrity. Manuals for the individual modules and maintenance support is readily available. Internal Controls: TRA has satisfactory standards and procedures stipulated in the staff regulation, financial regulation, accounting and procurement manuals. The Internal Audit departnent is responsible to ensure that all stipulated procedures and systems are adhered to. There is clear segregation of duties and responsibilities in both the expenditure and revenue sections. As the systems are computerized, these manuals will be updated. Fixed Assets: A computerized asset management module accounting for all fixed assets has been installed and details of individual assets are currently being posted. Staffing of Accounting and Finance Unit (Expenditure and Revenue) and responsibilities: Both Expenditure and Revenue units are under the Commissioner for Finance and Human Resources and all activities under Expenditure and Revenue unit are supervised by the Deputy Commissioners(expenditure and revenue) who are qualified (CPA) accountants. At each regional level there are senior accountants who are qualified (CPA or Advanced Diploma in Accountancy). All the key positions in the accounting expenditure section are filled with clear job description responsibilities and clear segregation of duties. There are a few authorized positions which will be filled after the computerization of the accounting department is fully in operation. Training on the new computerized system is ongoing. TRA Audit Report: The audit of TRA under its Acts is to be carried out by the Office of the Controller and Auditor General. The accounts are supposed to be submitted to the auditor within three months after the end ofthe TRA financial year. The first audit report for financial year ending June 1997 was unqualified but there were a significant number of serious issues raised in the management audit report The report together with the management letter was reviewed by the management and the Board, and replies submitted to the auditors. Most of the recommendations have been implemented. The draft accounts for the financial year ending June 30, 1998 submitted to the auditors in September 1998 and the audit is outstanding. TAP PPF accounts: Review of the Project Preparation Facility accounts including the special account was carried. The recording, documentation and authorization of payments are adequate. The audit of the PPF accounts is in the final stage and is expected to be completed shortly. The Project Management Reports (PMRs): The Project Management Reports (PMRs) required by the Bank under LACI were shared with TRA and were incorporated in the TAP Operational Manual. The terms of reference for the annual audit have also been supplied and was also included in the TAP Operational Manual. Disbursement data from the Project Preparation Facility (PPF) will be used to run the LACI PMR reports. Conclusion: On the basis of the above review, TRA does have satisfactory procedures for monitoring, approving, recording of expenditure and qualify for PMR based disbursement.  Project Appraisal Document Page 22 Country: Tanzania Project Title: Tax Administration Project Annex 6 Tax Administration Project Procurement and Disbursement Arrangements Procurement General: Procurement of goods, works, and services will be carried out following kanual Procurement Plans agreed with the Bank as part ofthe Annual Work Plan. Procurement of goods and works will be in accordance with "Guidelines for Procurement under IBRD Loans and IDA Credit" (January 1995, revised in January and August 1996, and September 1997) and procurement of Consulting Services will be in accordance with "Guidelines for Selection and Employment of Consultants by World Bank Borrowers" (January 1997 and revised September 1997). The Bank's standard bidding documents will be used for al International Competitive Bidding (ICB) and Banks Standard Request for Proposals will be used for Consulting Services. The allocation for project costs and IDA financing by procurement method is indicated in Table A of this Annex. The management of the procurement of goods and equipment, civil works, and consultant services under the Project will be the responsibility ofthe Project Coordination Unit (PCU), who will consist of a Project Coordinator (external consultant), Counterpart Project Coordinator, Procurement Advisor (externa consultant), Procurement Officer, and two Infrastructure Development Officers. Procurement Planning: A draft General Procurement Notice (GPN) for the project will be prepared, finalized and published in the United Nations Development Business (UNDB) and in local newspapers immediately after negotiations. The GPN will be updated every year and submitted to IDA. It wiU show all outstanding ICB for goods and works contracts, as well as consultng assignments. A procurement Plan will be prepared by the Borrower and agreed upon at Negotiations. The Procurement Plan will include relevant information on all goods, works, consulting services, and training under the Project as well as timing of each milestone in the procurement process. The management and actual status of all procurement will be reflected in the quarterly reports which will be submitted to IDA. The Procurement Plan will be updated annually as part ofthe Annuial Work Plan. Goods and Equipment: Goods consisting of information technology and communication equipmen, office machines and funiture, power generators, motor vehicles, and customs patrol boats, estimated at US$ 14.1 million equivalent, will be procured through Intemational Competitive Bidding (ICB) following Bank Guidelines and using Bank Standard Bidding Documents with appropriate modifications. Minimum value of each package would be no less than US$ 100,000. Procurement of office and information technology equipment, and furniture, valued at less than US$ 100,000 per contract up to an aggregate amount of US$ 2.0 million equivalent will be procured through National Competitive Bidding (NCB). Small quantities of goods such as office equipment and supplies, consumable materials and spare parts, which are normaly available off-the-shelf at competitive prices and cannot be grouped into packages of at least US$ 30,000 equivalent, would be procured through IAPSO (IJNDP) and/or prudent national/international shopping procedures, based on price quotations obtained from at least three reliable suppliers, provided that the aggregate amount does not exceed US$ 300,000 equivalent Supply contracts would where necessary include installation, maintenance and service back-up (technical assistance) for at least one year after delivery. All contracts above US$ 100,000 will be subject to IDA prior review in accordance with Appendix I ofthe Guidelines. Civil Works: Civil works will consist of: (i) construction of a regional office in Arusha; (ii) rehabilitation and modernization of Regional Offices in Kilimanjaro, Mbeya, Morogoro, Mwanza, Tanga, Zanzibar and Pemba; (iii) refurbishment and modernization of Income Tax Headquarters at Mapato House, VAT Headquarters at Kipata House and VAT offices at Samora Avenue; and (iv) rehabilitation and modernization of selected border/transit stations at 25 locations around the country. The contract for construction of the regional office in Arusha, estimated at around US$ 2.3 million equivalent, and the rehabilitation of Samora Building and Mapato House in Dar Es Salaam, estimated at around US$ 1.0 and US$ 2.4 million equivalent respectively, will be awarded on the basis of International Competitive Bidding (ICB) using Bank Guidelines and Bank Standard Bidding Documents for Smaller Works, January 1995 with Corrigendum No. 1 of October 6, 1996 and modified to meet project needs. The contracts for rehabilitation/refurbishment and/or new construction of regional offices, and rehabilitation of border posts and transit stations, estimated at less than US$ 1.0 million equivalent per contract up to an aggregate amount of US$ 3.6 million equivalent, will be awarded on the basis of National Competitive Bidding (NCB) procedures acceptable to IDA. This would include advertising the works, providing foreign embassies with a copy ofthe invitation forbids, public opening of bids, clearly stated evaluation criteria and award of the lowest evaluated bidder. Foreignl bidders, if interested, would not be precluded from participation. Assurances to this effect have been obtained, as well as that NCB documents will be based on World Bank Standard Bidding Documents (Smaller Works). All contracts estimated to cost more than US$ 250,000 equivalent will be subject to prior review by IDA. The Civil Works contracts will be supervised by consulting firms selected in accordance with Bank Guidelines. Consultancy Services and Studies: The project will finance consultancy services for detailed engineering design and supervision of civil works contracts, technical assistance for the PCU and in customs procedures, Tax Audit and IT specialists, internal auditing, and  Project Appraisal Document Page 23 Country: Tanzania Project Title: Tax Administration Project project preparation studies, in total 425 man-months. The consultancy services will be procured in accordance with the Bank's Guidelines for the Selection and Employment of Consultants published in January 1997, revised September 1997, and using the appropriate Standard Form of Contract for Consultants Services. Consultants for engineering design for Arusha Regional block and Mapato House, updating tax law, taxpayer ID system, IT feasibilty studies, software and customization, customs and IT advisor, stafftraining advisor, tax audit and investigation advisor, tax revenue collection and accountant advisor and the project coordinating unit, estimated to cost more than US$ 200,000 equivalent per contract, up to an aggregate amount of US$ 2.6 million equivalent will be selected through competition among short-listed firms and individuals based on Quality-and Cost-Based Selection (QCBS) by evaluating the quality of the proposals before comparing the cost of services to be provided. Consultants for detailed engineering design and site supervision of civil works, communication system, taxpayer education and VAT management control, estimated to cost less than US$ 200,000 equivalent per contract, up to an aggregate amount of US$ 1.7 million will be selected through competition among short-listed firms and individuals based on Quality-and Cost-Based Selection (QCBS) by evaluating the quality of the proposals before comparing the cost of services to be provided. Short-lists for contracts (estimated at less than US$ 150,000 per contract) for the detailed design and supervision of infrastructure improvements may comprise entirely of national consultants if a sufficient number of qualified finms (at least three) are available at competitive costs. However, if foreign firms have expressed interest for those contracts, they will not be excluded from consideration. Again the selection will be based on QCBS. Consultants for short term assignments to strengthen Tax Departments and IT Department estimated to cost more than 200,000 equivalent per contract up to an aggregate of US$ 0.6 Million equivalent will be selected through competition among short-listed firms/individuals based on the Consultant's Qualifications (CQ). The firm or individual evaluated for selection shall be asked to submit a combined technical-financial proposal and then be invited to negotiate a contract Consulants for short term assignments such as establishing harmonized appeal, TIN regulatory framework, and customs specialist, estimated to cost less than US$ 200,000 equivalent per contract, up to an aggregate amount of US$ 0.5 million equivalent will be selected through competition among short-listed firms based on the Consultant's Qualifications (CQ). T1he Standard "Request for Proposals (RFP)"and Form of Contract as developed by the Bank will be used for appointment of consultants. Simphfied contracts will be used for short-term assignment, i.e., those not exceeding three months, canied out by firms or individual consultants. Firms would be invited to submit expressions of interest for each assignment. Prior IDA review will apply for: (i) Terms of Reference (TOR) for all consultancy services; (ii) contracts to be awarded on the basis of sole source recruitment; (iii) draft contracts of the first three contracts estimated to cost more than US$ 50,000; (iv) selection procedures, short-lists and request for Proposals (RFP), qualifying technical proposals, final evaluation reports, and draft contracts when the estimated cost of the contract exceeds US$ 50,000 for individual consultants and US$ 100,000 for firm; (v) assignments of a critical nature (as reasonable detennined by the Bank) for individuals and firms estimated to cost less than US$ 50,000 and US$ 100,000 respectively; and (vi) contract amendments raising the values over US$ 50,000 and US$ 100,000 for individuals and firms respectively. All consultancy services not subject to prior review will be subject to post review in accordance with Appendix 1 of the Guidelines for selection of consultants. The Govemment has been briefed about the features of the new Consultants Guidelines (January 1997 and revised in September 1997), in particalar with regard to advertisement and public opening. Training: Training abroad and in-country, workshops and study tours, in total estimated at USS 4.1 million equivalent for the entire duration of the Project, will be canried out on the basis of IDA approved annual training programs which would identify the nature of training/study tours/workshops, institutions where training/study tours/workshops would be conducted (selection of Institutions and justification thereof), cost estimates, contents of the course will be reviewed by IDA on a quarterly basis.  Project Apprale Document Page 24 Country: Tanzania Project Title: Tax Adrmnistration Project Disbursement Arrangements Quarterly PMR-based disbursement procedures using the Special Account facility will be adopted for the implementation of the project; in cases were country/project circmstances warrant direct payment and/or special commitment procedures may be allowed as may be agreed by Loan Department prior to negotiations and clearly specified in the Credit Agreement Disbursements, representing mainly expenditures under short-term technical assistance, will be made over the project life. The proceeds ofthe IDA credit would be disbursed against 90% of expenditures on adl local expenditures and 100% of expenditures on all foreig enditures; for civil works, consultants semvices and traming, and equinpent and vehicles. As projected by Bank's standard disbursement profiles, disbursements would be completed by four months after project closure. Disbursements would be made against standard IDA documentation. Spedcal Account: In order to ensure timely provision of funds available to fimance tie costs of the project, a special account (SA) in the amount equivalent to the first six months estmated expenditures will be established in a commercial bank acceptable to IDA. Funds in the special account would be available to finance only eligible expenditures, under the project Prior to Credit effectiveness, the initial amount for six months estimated expenditure wil be deposited into this account Further deposits will be on a quarterly basis as determined tbrough the LACI Project Management Reportmg System. All disbursement will be channeled tbrough SA and in lieu of this, the borrower may choose to prefinance project expenditure and seek reimbursement from IDA. Counterpart Funds: In order to ensure the timely provision of counterpart funds, it is proposed that the Goverment establish a project account at a commercial bank acceptable to IDA, with an initial balance sufficient for the first quarter by Credit effectiveness. The Government will replenish the Project Account at intervals of not less than 3 months, with sufficient funds to meet the Government's share of expenditures under the project for the ensuing 3 months, and the funds would be applied only to this purpose. During negotiations, agreement would be reached regarding the arangements for establishing and operating the special and project accounts as well as an appropriate mechanism (such as revenue retention scheme) to ensure adequate counterpart funds.  Project Appraisal Document Page 25 Country: Tanzania Project Title: Tax Administrafion Project Table A: Project Costs by Procurement Arrangements3 (in US$ million equivalent) Expenditure Category Procurement Method Total Cost ICB NCB Other N.B.F 1. Civil Works 5.7 3.6 - 1.2 10.5 (5.7) (3.6) - (-) (9.3) 2. Goods 14.1 1.0 0.1 5.2 20.4 (14.1) (1.0) (0.1) (-) (15.2) 3. ConsultancyServices - - 5.4 10.1 15.5 (5.4) (-) (5.4) 4. Training - 3.1 12.3 15.4 (3.1) ()(3.1) 5. Refunding of PPF - - 1.9 - 1.9 (1.9) (1.9) 6. Unallocated - - 5.1 1.4 6.5 (5.1) ()(5.1) Total 19.8 4.6 15.6 30.2 70.2 (19.8) (4.6) (15.6) (40.0) Note: ICB = International Competitive Bidding NCB = National Competitive Bidding Other = Include consultant contracts following the rules for hiring consultants, international and nationalshopping, and purchasing from IAPSO N.B.F. = Not Bank-financed. Figures in parenthesis are the amounts to be financed by the Bank loan/IDA credit 3 For details on presentation of Procurement Methods refer to ODI 1.02, "Procurement Arrangements for Investment Operations." Details on Consultant Services can be shown more easily in the Table Al format (additional to Table A, where applicable).  Project Appraisal Document Page 26 Country: Tanzania Project Title: Tax Administration Project Table Al: Consultant Selection Arrangements (in US$ million equivalent) Consultant Services Selection Method Total Cost Expenditure Category QCBS QBS SFB - LCS ICQ Other N.B.F. A. Firms/Individual 2.6 - - 0.6 - 10.1 13.3 (2 .6) (0 (0 (0 (0.6) (0 (0 (3 .2) B. Individuals/Firms 1.7 ] - - 0.5 - 2.2 1 (1.7) (-) (-) (-) (0.5) (-) (I ) (2.2) Total 4.3 1.1 - 10.1 15.5 (4.3) (- (- (- (- (- (- (5.4) Note: QCBS = Quality- and Cost-Based Selection QBS = Quality-based Selection SFB = Selection under a Fixed Budget LCS = Least-Cost Selection CQ = Selection Based on Consultants' Qualifications Other = Selection of individual consultants (per Section V of Consultants Guidelines), Commercial Practices, etc. N.B.F. = Not Bank-financed. Figures in parenthesis are the amounts to be fnanced by the Bank loan. Table B: Thresholds for Procurement Methods and Prior Review4 Expenditure Contract Value Procurement Method Contracts Subject to Category (Threshold) Prior Review US $ millions US $ millions 1. Civil Works >1.0 ICB 5.7 0.10-1.0 NCB 3.6 <0.10 Others Post Review 2. Goods >0.1 ICB 14.1 0.03 - 0.1 NCB First three contracts; all others Post Review <0.03 Others Post Review 3. Consultancy Services >0.2 QCBS 2.6 0.1 - 0.2 QCBS 1.7 >0.2 CQ 0.6 <0.2 CQ 0.5 4. Miscellaneous Training All post review Others 3.1 Total 31.9* NOTE: * Balance not subject to prior review 4Thresholds generally differ by country and project. Consult OD 11.04 "Review of Procurement Documentation" and contact the Regional Procurement Adviser for guidance.  Project Appraisal Document Page 27 Country: Tanzania Project Title: Tax Administration Project Table C: Allocation of Loan Proceeds Amounts Expenditure Category US$ Financing Percentage million 1. Civil Works 9.3 100% of Foreign 90% of Local 2. Goods 15.2 100% of Foreign 90% Local 3. Consultant Services 5.4 100% 4. Training 3.1 100% 5. Refunding of PPF 1.9 Amount due 6. Unallocated 5.1 Total 40.0  Project Appraisal Document Page 28 Country: Tanzania Project Title: Tax Administration Project Annex 7 Tax Administration Project Project Processing Budget and Schedule A. Project Budget (US$000) Planned Actual (At final PCD stage) FY97 188.1 70.9 FY98 142.7 168.8 FY99 93.2 100.0 B. Project Schedule Planned Actual (At final PCD stage) Time taken to prepare the project (months) 11 months 26 months First Bank mission (identification) 3/15/1997 5/15/1998 Appraisal mission departure 9/12/1997 10/20/1998 Negotiations 11/20/1997 2/25/1999 Planned Date of Effectiveness 4/1/1998 7/1/1999 Prepared by: Tanzania Revenue Authority Preparation assistance: PPF for $1.9 milhon Bank staff who worked on the project include: Name Specialty James W. Adams Country Director RakeshNangia Team Leader/Sr. Operations Officer Brian Falconer Principal Operations Officer Luis Jose MeJia Sr. Public Sector Management Specialist Mercy M. Sabai Financial Management Specialist Pascal Tegwa Procurement Analyst Rey Castro Operations Specialist Sandra Hadler Team Leader / Sr. Economist Sture Karlsson Sr. Engineer V. S. Krislnakumar Procurement Specialist Preeti Ahuja Implementation Specialist  Proec Appralsa Document Pae 29 Country: Tanzania Project Tit.: Tax Administration Prolect Annex 8 Tax Adminstration Project Documents in the Project File* A. Project Implementation Plan Detailed PIP including TORs for key component areas. B. Bank Staff Assessments C. Other Documents in the Project File 1. The Tanania Revenue Authority Act, No. 11, April 1995 2. The Tanzania Revenue Authority Act (Amendment), April 1996 3. The Customs Management Act, 1952 4. The Excise Duty Act, 19 5. The Income Tax Act, No. 33, 1973 6. The Stamp Duty Act, 1972 7. The VAT Act and Amendments, 1997 8. The Project Preparafton Document (inception, draft and final reports), prepared by Barents under PPF consultancy, 1998. 9. Information Technology Strategy Report, (inception, draft and final reports), prepared by Coopers and Lybrand under PPF consultancy, 1998. Approved by TRA Board, August 1998 10. Architectural Study, (draft and final reports) prepared by Plan Associates Limited, Dar, 1998 11. TRA Organizational Study, (inception, draft and final reports), prepared by Coopers and Lybrand under IDF Grant, 1996. 12. Tax ID Number: Design and Implementation: (draft and final reports) prepared by Datacentralen, Demark, under PPF consultancy, 1998. 13. PPF Request, February 1997 & Reallocation requests of February & September 1998 14. TRA Corporate Plan, approved by TRA Board, September 1998. 15. Operational Manual, flnalized November 1998. 16. Trainmg Strategy prepared by DFID and approved by TRA board January 1999. 17. Customs report prepared by Bert Curunfigham, consultant * including electronic files.  Project Appraisal Document Page 30 Country: Tanzania Project Title: Tax Administration Project Annex 9 Statement of Loans and Credits (As of February 28,1999, in US$ Mi1lions) Difference Between expected Original Amount in US$ millions and actual Fiscal disbursements a/ Project ID Year Borrower Purpose IBRD IDA Cance Undisbu Orig Frm llati rsed Rev'd ons Number of Closed Projects: 93 Active Projects TZ-PE-2789 1998 GOVT of TANZANIA HUMAN RESOURCE DEV 1 0.00 20.90 0.00 16.59 1.22 0.00 TZ-PE-2804 1998 GOVT of TANZANIA AGRIC RESEARCH 0.00 21.80 0.00 20.49 .30 0.00 TZ-PE-2753 1997 GOVT of TANZANIA NAT EXT PROJ PH.II 0.00 31.10 0.00 21.81 6.66 0.00 TZ-PE-2821 1997 GOVT of TANZANIA SAC I 0.00 131.50 0.00 75.91 73.68 42.73 TZ-PE-38570 1997 GOVT of TANZANIA RIVER BASIN MGM.SMAL 0.00 26.30 0.00 19.76 3.87 0.00 TZ-PE-46837 1997 GOVT of TANZANIA LAKE VICTORIA ENV. 0.00 10.10 0.00 8.35 1.92 0.00 TZ-PE-2758 1996 GOVT of TANZANIA URBAN SECTOR REHAB 0.00 105.00 0.00 88.46 18.32 0.00 TZ-PE-35620 1996 GOVT of TANZANIA FINANCIAL INST. DEV. 0.00 10.90 0.00 .06 -.40 0.00 TZ-PE-2812 1995 GOVT of TANZANIA NINERAL SECTOR DEV. 0.00 12.50 0.00 4.15 1.80 0.00 TZ-PE-2770 1994 GOVT of TANZANIA ROADS II 0.00 170.20 0.00 153.53 141.24 0.00 TZ-PE-2801 1994 GOVT of TANZANIA ASMP 0.00 24.50 0.00 9.60 6.02 0.00 TZ-PE-2756 1993 GOVT of TANZANIA POWER VI 0.00 200.00 0.00 36.64 6.81 0.00 TZ-PE-2780 1993 GOVT of TANZANIA TELECOM III 0.00 74.45 0.00 28.36 23.88 26.24 TZ-PE-2788 1993 GOVT of TANZANIA PRIV. PUB. SECT. MGT 0.00 34.90 0.00 3.78 .59 0.00 TZ-PE-2817 1993 GOVT of TANZANIA FIN.& LEGAL MGT PROJ 0.00 20.00 .68 4.59 4.59 .98 TZ-PE-2785 1992 GOVT of TANZANIA FOREST RESOURCES NAN 0.00 18.30 0.00 .85 .29 0.00 TZ-PE-2757 1991 GOVT of TANZANIA RAILWAYS RESTRUCTURI 0.00 76.00 0.00 32.71 26.10 25.66 TZ-PE-2786 1991 GOVT of TANZANIA PETROL REHAB 0.00 44.00 0.00 26.71 23.43 16.81 TZ-PE-2774 1990 GOVT of TANZANIA HEALTH & NUTRITION 0.00 47.60 0.00 8.89 5.47 -1.55 TZ-PE-2783 1990 GOVT of TANZANIA ROADS I 0.00 180.40 0.00 42.03 23.26 0.00 TZ-PE-2784 1990 GOVT of TANZANIA PORTS MODERNIZATION 0.00 37.00 0.00 10.40 6.65 0.00 Total 0.00 1,297.45 .68 612.67 375.70 110.87 Active Projects Closed Projects l'otal Total Disbursed (IBRD and IDA): 723.14 2,158.69 2,881.83 of which has been repaid: 0.00 467.51 467.51 Total now held by IBRD and IDA: 1,296.76 1,638.73 2,935.49 Amount sold : 0.00 6.29 6.29 Of which repaid : 0.00 6.29 6.29 Total Undisbursed : 612.67 0.00 612.67 a. Intended disbursements to date minus actual disbursements to date as projected at appraisal. Note: Disbursement data is updated at the end of the first week of the month and is currently as of 28-Feb-99.  Project Appraisal Document Page 31 Country: Tanzania Project Title: Tax Administration Project Annex 10: Tanzania - At a Glance Sub- POVERTY and SOCIAL Saharan Low- Tanzania Africa Income Developmentcdlamond* 1997 Populaton, mid-year (millions) 31.3 614 2,048 Life expectancy GNP per capita (Atlas method, US$) 210 500 350 GNP (Atlas method, US$ billions) 6.6 309 722 Average annual growth, 1991-97 Popubtion (%) 2.9 2.7 2.1 G G Labor force (%) 2.9 2.6 2.3 Ip Gross per pnrnary Most recent ostimate (atest year availablo, 1991-97) capita A enrollment Poverty (% of population below national poverty line) 51 Urban population (96 of total population) 24 32 28 Life expectancy at birth (years) 61 52 59 . Intant mortality (per 1,000 live births) 82 90 78 Child malnutrition (% of children under 5) 28 .. 61 Access to safe water Access to safe water (% of population) 49 44 71 Illiteracy (% ofpopulation age 15+) 32 43 47 Gross primary enrollment (% ofschool-age population) 70 75 91 Tanzania Male 71 82 100 Low-income group Female 69 67 81 KEY ECONOMIC RATIOS and LONG-TERM TRENDS 1976 1986 1996 1997 Economic ratioV* GDP (USS billions) .. 7.5 5.9 6.7 Gross domestic inestmentVGDP .. 22.0 18.0 19. 5 Exports of goods and serviceslGOP .. 7.8 21.5 23.2 Trade Gross domestic savings/GDP .. 9.9 3A 12.6 Gross national savingslGDP .. 15.9 1.9 7.1 Current account balance/GDP .. -3.5 -16.1 -12.6 Domestic ne n Interest paymentslGDP .. 0.6 1.7 1.5 savings Investmnt Total debt/GDP .. 61.3 126.7 Total debt service/exports 6A 36.7 22.1 Present value of debVGDP . .. 41.9 Present value of debtVexports .. .. 210.0 Indebtedness 197646 1987-97 1996 1997 199842 (average annual growth) GDP .. 2.9 4.1 3.9 5.5 -Tanzania GNP per capita .. 1.3 1.7 1.3 2.5 - ---- Low-income group Exportsofgoodsandservices .. 13.5 14.2 18.8 6.0 STRUCTURE of the ECONOMY 1976 1986 1996 1997 Growth rates of output and Investment(%) (A of GDP) so Agriculture .. 58A 47.6 47.6 . Industry .. 9.5 13.9 14.3 20 Manufacturing .. 6.1 7.3 7.3 10 Services .. 32.1 38.5 38.0 0 -10 929 Private consumption .. 75.1 83.4 77.5 -20 I General govemment consumption .. 15.0 13.2 9.9 -GDI 0--GDP Imports of goods and services .. 19.9 36.2 30.1 197646 1987-97 1996 1997 Growth rates of exports and Imports (%) (average annual growth) Agriculture .. 3A 4.8 3.9 30 Industry .. 2.4 2.5 3.9 20 Manufacturing .. Services .. 2A 3.2 3.9 io f Private consumption .. 3.0 4A .. General govemment consumption .. -1.3 -12.2 .. 92 9S 94 as e 97 Gross domestc investment -0.7 -9.1 0.0 -10 Imports of goods and services .. 2.4 -1.1 -0.7 -Exports 0Imports Gross national product .. 4A 4.6 4.2 Note: 1997 data are preliminary estimates. t The diamonds show four key indicators in the country (in bold) compared with its income-group average. If date are missing, the diamond will be incomplete.  Project Appraisal Document Page 32 Country: Tanzania Project Tite: Tax Administration Project Tanzania PRICES and GOVERNMENT FINANCE Domestic pricin1976 1986 1996 1997 Inflatlon (%) (% change) 40 Consumer prices 6.9 32A 267 17.1 30 Implict GDP deflator 22.6 16.4 20 Government ffnance 10 (% of GDP, includes current grants) o Current revenue 14.9 13.2 13.9 02 93 94 95 ss 07 Curmnt budget balance -4.3 -0 8 1.1 "'GDPdeflator 1'4CP1 Overall surplusidefit -5.9 -4.3 -1.6 TRADE (US$ millions) 1976 1986 1996 1997 Export nd Import levels (USS millions) Total exports (fob) 317 726 768 1o000 Coffee 152 139 136 Cotton 30 123 126 s Manufactures sW Total imports (cif 40D Food Fuel and energy 2I Capital goods o , Export price index (1995=100) .. 92 93 94 ss go 07 Import prce Index (1995=100) .. Expons *lmpors Temis of trade (1995=100) .. BALANCE of PAYMENTS (USS millions) 1976 1986 1996 1997 Current accoDunt balance to GDP ratio(%) Exportsofgoodsandservices 626 426 11t 9 1,272 0 Imports of goods and services 697 1,105 1,986 2,040 Resource balance -71 -680 -847 -768 Net income -18 -105 -115 -100 Net current transfers 55 20 26 Current account balance -34 -265 -942 -842 -20 Financing items (net) 56 268 1,023 1,114 Changes in net reserves -22 -4 -el -Z12 -30 Hemo: Reserves induding gold (USS millions) .. .. 240 461 Conversion rate (DEC, local/US$) 18.6 580.0 612.1 EXTERNAL DEBT and RESOURCE FLOWS 1976 1986 1996 1997 (US$ millions) Composioan of total debt, 1996 (USS mDllons) Total debt outstanding and disbursed 1,380 4,609 7,412 IBRD 90 291 56 34 G 107 A-:56 IDA 109 670 2,242 2,306 0.1.067 Total debt service 41 156 258 .. _ 2,242 IBRD 7 47 33 24 F409 IDA 2 8 31 32 Composition of net resource flows Official grants 119 483 441 Official creditors 128 168 81 C :206 Private creditors 28 69 -7 Foreign direct investment 0 -8 150 I: 2,837 D: 605 Portfolio equity 0 0 0 Wodd Bank program Commitments 89 185 173 ISO A - IBRD E - Blateral Disbursements 39 92 134 183 B -IDA D- Other nimutlateral F - Prhate Principal repayments 2 29 40 36 I- IMF G - Short-tem4 Net flows 38 63 94 147 Interest payments 7 26 23 20 Net transfers 31 38 71 127 Development Economics 1011/98  MAP SECTION  - ! 31- UGgL[)y -A -_ .=. 312- 38'_1 Lak VitriaMsm / > b i~Y ukobo0 M so _ ( RWANDA KAG MARA - - KENYA h BURUNDIrR N ArushoDIAN Tan ganyika~ ~ ~ ~ ~~~~~~hnyna a doto on any ) aMA>SHINYANGA wy k e ; MorlyorKILI N.ANGA M 4'- jKi oImau Ora $ingidJ a TANGA < - othe ,nomto shw t tb W i t4 o$t j i-l6 On On por of Xt * a The Worldres olor,bea X J k Droop ooy ldgineot on the ego! ,r " ototos of any territory~~~~~~~Tng- or any endorsement AL1S L' 1- hoondories ^\ZNA J Lid M fAIN ROADS (3 REGION CAPITALS . . _ r +RAILROADS * NATIONAL CAPITAL' " ! _3 *>~ RIVERS -.REGION BOUNDARIES <350ngeo a ; TABOP,~~~~~~~~~~~~~~~~~~~~~~~~~~~ :> ~~~~~~- INTERNATIONAL BOUNDARIES 0 Be9 7a zl ~~~~~~~~~~~~~~~~~~~~~~~~~~o' 4 Doo2o .r es << ro~~~~~~~~~~~s 'a 30-rccc KIO^TR 363' OZAMBIQUE ( ter 00 36, 30' 0'Re er4oir,INDIAN