World Bank, Japan support Vietnam in improving tax system’s effectiveness

The World Bank and the State Bank of Vietnam have signed a financing agreement for a grant worth US$4.2 million, provided by the Japanese Government, to execute the Revenue Administration Reform Support Project.

The project aims to improve the effectiveness of tax administration through the use of a comprehensive risk management system and by redesigning business processes and information technology used by the tax department.

It will also support the modernization of the tax policy framework by assessing the impact of tax policy changes.

“The World Bank’s commitment to this project is a sign of our broader commitment to working with Vietnam in strengthening its fiscal performance and adopting growth-friendly fiscal reforms,” said Ousmane Dione, the World Bank country director for Vietnam, in a statement.

He added that by focusing on the tax system, the project will help enhance domestic resources mobilization, which is an important pillar of fiscal consolidation.

The changing composition of Vietnam’s tax revenues, leaning toward increased reliance on domestic sources, poses both opportunities and challenges. This calls for enhanced efforts to strengthen tax policy formulation and modernize tax administration.

There is a need to strengthen the performance of core tax administration areas, especially those with high impact on tax compliance, operational efficiency and transparency.

The tax policy framework should aim to broaden the base and rebalance the tax mix to exert coherent effects on sustainable revenue mobilization and reduce the tax-induced burden on growth and equity.

A major component of this project is the development of a roadmap to modernize the Information Technology System for tax administration and lay a foundation for IT infrastructure, so the General Department of Taxation can use modern IT solutions for business processes.

Another component focuses on building the capacity of policymakers to analyze and formulate tax policies. The project will analyze the impact of proposed changes to core tax instruments, in line with Vietnam’s Tax Reform Strategy and international best practices. It also supports the preparation of the legislative framework to introduce a property tax.

The grant is being provided by the Japanese Government through the Policy and Human Resource Development Program, which is administered by the World Bank.

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