Tajikistan’s National Development Strategy (NDS) sets a target of increasing domestic incomes by up to 3.5 times and reducing poverty by half by 2030. A report by the World Bank notes that domestic revenue mobilization is one of the top policy priorities to facilitate the required fiscal consolidation in a context of an already high level of debt.
Environmental and Social Systems Assessment (ESSA) says the Government declared its intention to continue reforming its tax administration after the five-year Tax Administration Reform Project (TARP) with support of the World Bank was completed. Consequently it adopted a program “Tax Administration Development Program for Tajikistan 2020-2025”, which will be supported by the World Bank.
Since the Tax Reform Program in Tajikistan PforR relies on the borrower’s fiduciary, procurement, and environmental and social systems, World Bank teams carried out assessments of those systems and developed a program action plan (PAP).
The ESSA includes the following information: an introduction of the PforR; a summary of environmental and social risks and benefits associated with activities for achieving the Program Development Objective (PDO) and the Disbursement Linked Indicators (DLIs) for each Results Area of the PforR; an assessment of the borrower’s environment and social management systems which apply to these activities; an evaluation of the borrower’s performance and track record in implementing its environment and social management systems; an assessment of the extent to which the borrower’s environment and social management systems are consistent with the six core environment and social principles of the World Bank Policy; and recommendations and actions the borrower has agreed to undertake to improve the implementation of applicable systems.
The report notes that taxation issues are the most challenging for the private sector in Tajikistan.
Due to weak tax administration, the burden of taxation reportedly rests disproportionately on a small number of formal firms, while also creating disincentives for small firms and producers to formalize their businesses and constraining their growth potential.
The country’s macro-fiscal context suggests that domestic revenue mobilization remains a top policy priority to facilitate the required fiscal consolidation in a context of an already high level of debt, according to the report.
Tajikistan’s total tax effort was reportedly still close to the average for lower-middle-income countries. There was a notable increase in the number of active taxpayers between 2012 and 2019: the total number of active taxpayers increased by 88.5% and corporate income tax (CIT) taxpayers increased by 114%. The largest share of tax revenue comes from value added tax (VAT) on imports, followed by VAT on domestic transactions, followed by personal income tax (PIT) and corporate income tax. Despite the positive developments, more revenues from low-distortion taxes are needed to support Tajikistan’s robust development agenda of poverty reduction, social service delivery, and infrastructure upgrade and expansion.
