Posted by Rocio Sarmiento[1]
Since 2009, the Fiscal AffairsDepartment (FAD) of the IMF has been providing considerable technicalassistance (TA) to South East European (SEE) countries through a Regional Programthat is sponsored by the Japanese Government, and is implemented in closecooperation with the Center for Excellence in Finance (CEF), based in Ljubljana,Slovenia. The overarching objective of the Program is to strengthen fiscalmanagement capacity to ensure that all SEE countries—EU member and non-EUmember countries alike—have the necessary capacity to design and implementmeasures to support fiscal consolidation and long-term fiscal sustainability.
The fiscal consolidation efforts ofSEE governments have been supported by strengthening fiscal controls, improvingthe allocation of budgetary resources and more cost-effective service delivery,while efforts to protect revenue through more efficient revenue administration havefocused on facilitating reform efforts that over time should bring the region’s taxadministrations on par with modern European counterparts, and achieveconsistency in the application of tax administration practices throughout theregion.
Whilethe current economic crisis that is affecting the region has brought to theopen new weaknesses in specific areas of fiscal management, sustainedreform efforts over the last decade have already led to important successes:
- In publicfinancial management, key achievements include theconsiderable progress made in putting into place medium-term budget frameworks(Romania and Serbia), the continued trend towards introducing new fiscalresponsibility legislation and accompanying fiscal rules, and the introductionof fiscal councils (Croatia and Slovenia). Similarly, considerable progress hasbeen made in the development of fiscal reporting that meets internationalstandards (Bosnia and Herzegovina) and budget execution processes (Kosovo andMacedonia), and many countries include cash and debt management as a highpriority on their capacity-building agenda (Albania and Montenegro).
- Inrevenue administration, commitment to reform has increased significantly acrossall countries. Strategic business plans detailing reform efforts are now inplace in most countries. These set out the direction, methods, activities andtimelines for aligning the tax administrations with international recognizedstandards. A modern Compliance Risk Management model, which is also recommendedby the EU and the OECD, is being phased in across the region with already excellentcompliance outcomes in a number of countries. Most tax administrations in theregion have succeeded in reorganizing their headquarters to reflect taxadministration functions (while still maintaining overly large fieldstructures) and have acted on the advice to segment taxpayers into riskcategories and to create Large Taxpayer Offices. The establishment of viablebusiness plans for reforms and the clarity achieved with regard to the taxagencies’ strategic IT directions have been instrumental in helping the taxadministrations to attract donor support for essential IT reforms. This has,for example, occurred in Albania (donor: Austrian Government) and Moldova(donor: World Bank). Without such inputs full modernization of taxadministrations will be impossible. These positive developments have benefittedgreatly from sustained TA support, which has been made possible largely byfunding provided by the Government of Japan (at times supplemented by otherdonors). FAD technical assistance has also facilitated donor coordination byoffering clear reform roadmaps that are appropriately prioritized andsequenced.
The regional approach to technical assistancehas been made possible through a very close collaboration between FAD and the CEFin terms of creating synergies between FAD technical assistance and CEFtraining activities, thus leveraging the impact of both capacity development activitiesthroughout the SEE region.
Thecontinued support of the Japanese Government has allowed FAD to renew its commitment to supporting reforms infiscal management throughout the SEE and continue its close collaboration withthe CEF to the benefit of countries in the region.
[1]TechnicalAssistance Officer for the Resource Management Division, working closely withFAD’s technical assistance divisions in preparing the department’s TA,monitoring delivery and providing management information.
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