Economic IMC: Ministry of Finance Commitment Document Beirut, Lebanon 17 March 2018 0
Ministry of Finance Commitment Document 4 The Minister of Finance commits to the timely implementation of the following programs: – Program FIN-001: Rationalize expenditures (Aug. 2001 – Dec. 2011): the program objectives are to reduce waste and increase the effectiveness and productivity of spending, and to rationalize non-interest expenditures, contain the wage bill, and reform public sector enterprises – Program FIN-002: Enhance revenues (Oct. 2006 – Dec. 2011): the program objectives are to undertake revenue enhancing measures through improving tax structure and collection, guided by the need to minimize distortions and enhancing equity and fairness in the distribution of tax burden and enhance revenue collection from government properties – Program FIN-003: Undertake budget and financial management reform (Oct. 2006 – Dec. 2011): the program objectives are to develop a modern Budget System Law (BSL) which will be the anchor for all reform measures, enhance public expenditure management with more accountability and transparency, enhance institutional capacity, improve regulatory framework, and improve fiscal reporting – Program FIN-004: Undertake revenue management and administrative reform toward a functionbased structure (Jan. 2006 – Dec. 2010): the program objectives are to improve formulation and implementation of fiscal policy, enhance equity and fairness in the distribution of the tax burden, implement good governance, undertake structural measures aimed at modernizing the revenue administration towards function based structure with full strong headquarters, fully automated business processes, risk based compliance programs and skilled and professional staff – Program FIN-005: Strengthen Debt Management with the aim to reduce the costs and risks of the government's debt portfolio (Jul. 2003 – Dec. 2011): the program objectives are to strengthen debt management with the aim to reduce the costs and risks of the government's debt portfolio 1
Ministry of Finance Commitment Document … (Cont’d) – Program FIN-006: Reform capital markets (Jan. 2008 – Dec. 2008): the program objectives are to develop Lebanon's capital markets – Program FIN-007: Improve the business environment (Apr. 2005 – Dec. 2011): the program objectives are to improve the business environment and reduce the cost of doing business in Lebanon, improve the competitiveness and employment creation, and encourage the recovery of the private sector in the aftermath of the Israeli war – Program FIN-008: Facilitate trade (Jan. 2008 – Dec. 2008): the program objectives are to facilitate imports, lower related costs, and automate operations at Beirut port Note: Detailed supporting documents are attached in the appendix Signature: H. E. PRESIDENT OF COUNCIL OF MINISTERS Date: 2007 H. E. MINISTER OF FINANCE Date: 2007 2
Ministry of Finance – Program Charter 1 Program Title Rationalize expenditures Program Owner Minister of Finance Program Number FIN-001 Key Stakeholders Ministry of Energy and Water, CDR, Higher Relief Council, PCM Program Objectives/Description High Level Work Plan 4 Reduce waste and increase the effectiveness and productivity of spending 4 Rationalize non-interest expenditures, containing the wage bill, and reforming public sector enterprises, especially EDL. 4 Revise the salary and benefits structure for some public officials 4 Extend the working hours in the public sector from 32 hours a week to at least 36 4 Reduce travel and communication expenses 4 Work on phasing out the “Council of the South” and the “Fund for the Displaced” 4 Contain the wage bill in the medium term through reducing the size of the public sector by attrition and by limited hiring 4 Reduce the budgetary cash transfer to EDL through adoption of the Power Sector Reform Plan. 4 Maintain the quality of infrastructure and invest in high-value projects while reducing the cost of funding. Key Risks 4 Requires Parliament approval for some measures 4 Security issues (potential increase in military spending) 4 Any further increase in fuel prices Milestones Requirements Description Technical Assistance Budget Ministry Team 4 Available Budget: 4 Complementary Budget: 4 TOTAL BUDGET: - 4 (i) Wages and salary dynamics controlled by restricting recruitment to essential position; 4 (ii) Decision not to replace one for one civil servants that retire and replaced by more junior, less expensive staff; 4 (iii) Transfer of $500 million from 2007 to 2009 to the COS & DF after which they are assumed to be closed KPIs 4 Level of spending versus EPCA target Target 4 Primary expenditures to meet EPCA targets for all quarters 3
Ministry of Finance – Paris III Program 1 Initiatives List of Programs and Initiatives Sector Programs and Initiatives- Stakeholders 1. Rationalize expenditures 16/8/2001 1 d. Work on terminating the “Council of the South” and the “Fund for the Displaced” 1 e. Contain the wage bill in the medium term through reducing the size of the public sector by attrition and by limited hiring 1 f. Reduce the budgetary cash transfer to EDL through adoption of the Power Sector Reform Plan 1 g. Submit to Parliament a draft 2007 budget law consistent with the targeted primary balance of the central government and including detailed HRC operations and CDR foreign-financed expenditures (EPCA) 1 h. Maintain the quality of infrastructure and invest in highvalue projects, while reducing the cost of funding Natural Owner 30/12/2011 M 1/1/2008 30/12/2011 M 1/5/2007 31/12/2007 S 16/8/2001 31/12/2009 S 16/2/2004 31/12/2010 S 1/1/2008 30/12/2011 M 1/1/2008 2/4/2008 L 1/1/2008 Mo. F 30/12/2011 1/1/2008 1 a. Revise the salary and benefits structure for some public Mo. F officials 1 b. Save on transportation allowances through extending the Mo. F working hours in the public sector from 32 hours a week to at least 36 1 c. Reduce travel and communication expenses Mo. F XXX Implementation Priority Timeline 30/12/2011 L Mo. F, Mo. EW, PCM Mo. F, CDR, HRC Mo. F, CDR IMPLEMENTATION: S: Short term M: Medium Term L: Long Term 4
Ministry of Finance – Program Charter 2 Program Title Enhance revenues Program Owner Program Number FIN-002 Key Stakeholders Minister of Finance Program Objectives/Description High Level Work Plan 4 Undertake revenue enhancing measures through improving tax structure and collection, guided by the need to minimize distortions and enhancing equity and fairness in the distribution of tax burden and enhance revenue collection from government properties 4 Settle the seashore violation issue and start collecting rent on infringed properties 4 Lift the cap on domestic car gasoline prices 4 Enhance revenue collection from public properties namely “Casino du Liban” 4 Increase the VAT rate from 10% to 12% in 2008 and from 12% to 15% in 2010 4 Collect the 5 percentage points additional VAT on water, electricity and telecom 4 Adopt monthly VAT filing for large corporations for improved cash management 4 Increase the tax on interest income from 5 percent to 7 percent 4 Introduce the Global Income Tax 4 Strengthen the Built Property Tax administration Key Risks 4 Council of Ministers’ decisions and Parliament’s approval Milestones Requirements Description Technical Assistance Budget Ministry Team 4 Available Budget: 4 Complementary Budget: 4 TOTAL BUDGET: - 4 (i) Settlement of seashore violations 4 (ii) Uncapping mechanism proposed and approved by Council of Ministers and hence came into effect 4 (iii) VAT increased from 10% to 12% in 2008 and then from 12% to 15% in 2010 4 (iv) Interest income increased from 5 % to 7% 4 (v) GIT introduced 4 (vi) Comprehensive database on build properties built and updated KPIs 4 Tax and non-tax revenues versus EPCA projections Target 4 Revenues to meet EPCA targets for all quarters 5
Ministry of Finance – Paris III Program 2 Initiatives List of Programs and Initiatives Sector Programs and Initiatives- Stakeholders 2. Enhance revenues Implementation Priority 2/10/2006 2 a. Settle the seashore violation issue and start collecting rent on infringed properties 2 b. Lift the cap on domestic car gasoline prices (EPCA), through issuing a Council of Ministers resolution/decree setting a specific floor on gasoline excise of LL 300 per liter of gasoline and gradually increase excise tax rate 2 c. Enhance revenue collection from public properties namely “Casino du Liban” 2 d. Increase the VAT rate from 10% to 12% in 2008 and from 12% to 15% in 2010. 2 e. Collect the 5 percentage points additional VAT on water, electricity and telecommunication. 2 f. Adopt monthly VAT filing for large corporations for improved cash management 2 g. Increase the tax on interest income from 5 percent to 7 percent 2 h. Introduce the Global Income Tax to replace the current scheduler income tax system 2 i. Strengthen the Built Property Tax administration through building a comprehensive database on built properties XXX Timeline Natural Owner 1/10/2008 31/12/2008 M 1/1/2008 31/12/2011 L 1/1/2007 31/12/2011 S 1/1/2008 31/12/2010 M 1/1/2008 31/12/2010 L 1/1/2008 31/12/2010 M 1/1/2008 31/12/2008 M 1/10/2009 31/12/2009 L 2/10/2006 Mo. F 31/12/2011 31/12/2007 S Mo. F Mo. F IMPLEMENTATION: S: Short term M: Medium Term L: Long Term 6
Ministry of Finance – Program Charter 3 Program Title Undertake budget and financial management reform Program Owner Minister of Finance Program Number FIN-003 Key Stakeholders Spending agencies, Concerned ministries Program Objectives/Description High Level Work Plan 4 Develop a modern Budget System Law (BSL) which will be the anchor for all reform measures; 4 Enhance public expenditure management with more accountability and transparency 4 Enhance institutional capacity 4 Improve regulatory framework 4 Improve fiscal reporting 4 Reform the budget preparation process and linking it to Macro fiscal framework 4 Increase budget coverage 4 Reform Treasury Operations 4 Prepare a “Budget System Law” to encompass all the reform measures 4 Adopt fiscal accountability law 4 Build capacity within the different directorates involved in the expenditure cycle Key Risks Milestones 4 Requires Parliament approval for some measures 4 Political risks 4 Cooperation of spending agencies Requirements Description Technical Assistance Budget Ministry Team 4 (i) Top-down approach to reform the budget preparation process adopted (ii) Budget laws issued with medium term expenditure frameworks (MTEF) attached 4 (iii) Budget ceilings set per ministry in accordance with sector 4 priorities 4 (iv) Budget coverage extended and CDR & other extra budgetary 4 spending consolidated within the budget 4 (v) Performance budgeting introduced KPIs 4 Available Budget: 4 Complementary Budget: 4 TOTAL BUDGET: - Target 4 Budget preparation 4 Budget that reflects sector priorities and done linked to a medium term within 3 year-framework, calculates cost of expenditure framework producing outcomes, and solves issues of (MTEF) appropriations and carryovers, complementary period and treasury advances 4 Number of line 4 All line ministries adopting new budget approach 7
Ministry of Finance – Paris III Program 3 Initiatives List of Programs and Initiatives Sector Programs and Initiatives- Stakeholders 3. Undertake budget and financial management reform 3 a. Adopt a top-down approach to reform the budget preparation process 3 b. Link the budget preparation to a medium-term expenditure framework (MTEF) prepared by Mo. F 3 c. Prepare MTEF in coordination with spending agencies XXX Natural Owner Implementation Priority 01/01/2007 S 31/12/2001 S 1/1/2007 31/12/2001 S 1/6/2007 30/6/2007 S 1/6/2007 27/2/2009 S 1/1/2008 31/12/2011 S 1/1/2008 Mo. F, Spending agencies 31/12/2001 1/1/2007 Mo. F 31/12/2011 1/1/2007 Mo. F 3 d. Submit to Parliament a draft 2007 budget law consistent Mo. F with the targeted primary balance of the central government and including detailed HRC operations and CDR foreign-financed expenditures (EPCA) 3 e. Extend the budget coverage and consolidate CDR Mo. F spending and other extra budgetary entities within the budget 3 f. Prepare for introduction of performance budgeting Mo. F, Concerned ministries 3 g. Improve cash management through establishing cash management unit, upgrade the IT system to accommodate this reform, restructure the treasury functions and link debt to cash management Timeline 31/12/2008 M Mo. F IMPLEMENTATION: S: Short term M: Medium Term L: Long Term 8
Ministry of Finance – Paris III Program 3 Initiatives List of Programs and Initiatives Sector Programs and Initiatives- Stakeholders 3 h. Prepare the introduction of a Treasury Single Account Mo. F (TSA) through working on the necessary legislations and decrees required for managing the TSA (awaiting enactment as the draft is already in Parliament) 3 i. Prepare a “Budget System Law” to encompass all the Mo. F reform measures 3 j. Adopt a fiscal accountability law Mo. F Natural Owner IMPLEMENTATION: Implementation Priority 1/1/2008 M 31/12/2011 M 1/1/2008 30/12/2008 L 1/1/2008 S: Short term 30/12/2008 1/1/2008 3 k. Build the capacity within the different directorates Mo. F involved in the expenditure cycle: 1) improving the analytical capacity of the budget directorate to meet the requirements of the new budget preparation approach. 2) Improve the cash management skills of the treasury directorate XXX Timeline 30/12/2011 L M: Medium Term L: Long Term 9
Ministry of Finance – Program Charter 4 Program Title Undertake revenue mgt and administrative reform toward a function-based structure Program Owner Program Number FIN-004 Key Stakeholders Minister of Finance Program Objectives/Description High Level Work Plan 4 Improve formulation and implementation of fiscal policy 4 Enhance equity and fairness in the distribution of the tax burden 4 Implement good governance 4 Undertake Structural measures aimed at modernizing the revenue administration towards function based structure with full strong headquarters, fully automated business processes, risk based compliance programs and skilled and professional staff 4 Reorganize regional tax offices along function based operations 4 Establish taxpayer services in satellite offices 4 Introduce the "Tax Procedure Code" that unifies and harmonizes the various tax procedures 4 Finalize the draft law for introducing a Global Income Tax (GIT) to replace the current schedular income tax system , and work in progress for the development of related regulations and procedures 4 Introduce electronic registration of taxpayers 4 Put in place a new audit strategy based on risk selection criteria, new audit techniques and procedures, and develop an audit manual 4 Integrate built property data systems between Land registry at Cadastre and Built Property Administration 4 Provide tax incentives for affected enterprises Key Risks 4 Political environment Milestones Requirements Description 4 Tax reform project team-UNDP Technical Assistance Budget Ministry Team 4 Available Budget: 4 Complementary Budget: 4 TOTAL BUDGET: 4 All the Revenue Directorate employees 4 Regional tax offices reorganized 4 Taxpayer services in satellite offices established 4 Tax Procedure Code introduced 4 Draft law for introducing the Global Income Tax finalized 4 E-registration introduced 4 New audit strategy developed 4 Comprehensive database on built properties developed and updated 4 Tax incentives for affected enterprises provided KPIs 4 Higher compliance rate 4 Improved services 4 Increased revenues collection Target 4 Increased 4 Improved 4 Increased 10
Ministry of Finance – Paris III Program 4 Initiatives List of Programs and Initiatives Sector Programs and Initiatives- Stakeholders 4. Undertake revenue management and administrative reform toward a function-based structure 4 a. Reorganize revenue administration along a function based structure with strong headquarters 4 b. Reorganize regional tax offices along function based operations 4 c. Establish taxpayer services in satellite offices Natural Owner 31/12/2007 S 1/1/2008 31/12/2010 M 1/1/2008 31/12/2010 M 3/4/2006 31/12/2007 S 1/1/2008 Mo. F M 2/7/2007 Mo. F 31/12/2008 2/1/2006 Mo. F 31/12/2010 1/1/2008 Mo. F 4 e. Reinforce the large taxpayers’ office (LTO) with new Mo. F automated procedures. 4 f. Establish a unit for medium taxpayers (MTO) and Mo. F potentially develop a simplified scheme for the small taxpayers 4 g. Finalize the development of the comprehensive database Mo. F of employees, and extend the reformed operations to regional offices within DASS reform context of wages and salaries tax department 4 h. Reinforce the newly established Tax roll department Mo. F XXX Implementation Priority 2/1/2006 4 d. Expand large taxpayers’ office (LTO) coverage to include Mo. F other taxes and fees 4 i. Introduce the "Tax Procedure Code" that unifies and harmonizes the various tax procedures 4 j. Update "Stamp Fees" law to increase its fairness and facilitate its application Timeline 31/12/2010 L Mo. F IMPLEMENTATION: S: Short term M: Medium Term L: Long Term 11
Ministry of Finance – Paris III Program 4 Initiatives List of Programs and Initiatives Sector Programs and Initiatives- Stakeholders 4 k. Finalize the draft law for introducing a Global Income Tax Mo. F (GIT) to replace the current schedular income tax system , and work in progress for the development of related regulations and procedures 4 l. Introduce electronic registration of taxpayers Mo. F 4 m. Launch electronic filing (e-filing) and electronic payment (e-payment through commercial banks) 4 n. Rely on mail services to simplify taxpayers filing obligations 4 o. Modernize and streamline operations and automate the various processes and procedures 4 p. Put in place a new audit strategy based on risk selection criteria, new audit techniques and procedures, and develop an audit manual 4 q. Integrate built property data systems between Land registry at Cadastre and Built Property Administration 4 r. Improve collections of receivables so as to reduce accumulation of revenue arrears 4 s. Implement Tax Procedure Code - Prepare executive regulations and procedures - Prepare and disseminate new audit manual - Create independent appeal/ review body with public and private sector participation for appeals of tax audits XXX Natural Owner Implementation Priority Timeline 2/10/2006 S 30/12/10 M 1/1/2008 30/12/2008 L 2/1/2007 31/12/2007 S 2/10/2006 31/12/2007 S 1/1/2008 0/12/2008 L 1/1/2008 Mo. F 30/12/2007 1/1/2008 Mo. F S 3/4/2006 Mo. F 30/9/2008 31/12/2008 M Mo. F IMPLEMENTATION: S: Short term M: Medium Term L: Long Term 12
Ministry of Finance – Paris III Program 4 Initiatives List of Programs and Initiatives Sector Programs and Initiatives- Stakeholders 4 t. Simplify stamp tax compliance and limit application to major revenue sources Extend declaration period 4 u. Determine alternative and more efficient sources of revenue to stamp tax 4 v. Eliminate stamp tax Timeline Implementation Priority Mo. F 1/1/2008 31/12/2008 L 1/1/2008 31/12/2008 M Mo. F 1/1/2009 31/12/2009 L 4 w. Reduce tax penalties for small irregularities Mo. F 1/1/2008 31/12/2008 M 4 x. Simplify further the tax procedures and reduce the number of separate taxes and fees while preserving neutral fiscal impact 4 y. Provide tax incentives for affected enterprises Mo. F 1/1/2008 31/12/2008 M Mo. F 3/7/2006 31/12/2007 S 4 z. Harmonize tax treatment of SARL and SALs Mo. F 1/1/2008 31/12/2008 M 1/1/2008 30/12/2011 L 4 aa. Continue to strengthen, follow-up on complaint mechanism for VAT 4 ab. Enhance Revenue Collection through improved communication with taxpayers and improved taxpayers' services XXX Natural Owner Mo. F IMPLEMENTATION: S: Short term M: Medium Term L: Long Term 13
Ministry of Finance – Program Charter 5 Program Title Strengthen debt management Program Owner Minister of Finance Program Number FIN-005 Key Stakeholders BDL, Parliament Program Objectives/Description High Level Work Plan 4 Strengthen Debt Management with the aim to reduce the costs and risks of the government's debt portfolio 4 Improve debt reporting and transparency and publish quarterly debt publications 4 Formalize and enhance coordination between Mo. F and BDL by creating a “Higher Council for debt Management”” 4 Enact the currently existing draft law in Parliament to modernize debt management 4 Develop a formal debt management strategy 4 Develop secondary market liquidity in LL by introducing longer maturity instruments 4 Star modifying T-bill auction frequency and procedures Key Risks 4 Economic environment risk 4 Political risk 4 Institutional risk Requirements Milestones Description 4 (i) Specialized Regular Debt Reporting that supplements Public Finance 4 Monitor and provides timely detailed debt information 4 (ii) Creation of a “Higher Council for Debt Management” 4 (iii) Debt Management Strategy Technical Assistance Budget Ministry Team 4 Available Budget: 4 Complementary Budget: 4 TOTAL BUDGET: - KPIs 4 Improved debt reporting 4 Creation of “Higher Council for Debt Management. 4 Background analysis for the formal debt management strategy Target 4 Report on debt and debt markets published on quarterly base 4 Higher Council for Debt Management created 4 Debt management strategy completed 14
Ministry of Finance – Paris III Program 5 Initiatives List of Programs and Initiatives Sector Programs and Initiatives- Stakeholders 5. Strengthen debt management Timeline Implementation Priority 10/07/2003 30/12/2011 1/1/2007 30/12/2011 S 5 b. Formalize and enhance coordination between Mo. F and Mo. F, BDL by creating a “Higher Council for debt management” 1/1/2008 31/12/2008 M 5 c. Enact the currently existing draft law in Parliament to modernize debt management Mo. F, Parliament 1/1/2008 31/12/2008 L 5 d. Develop a formal debt management strategy Mo. F 1/1/2008 31/12/2008 M 5 e. Develop secondary market liquidity in LL by introducing longer maturity instruments Mo. F 10/7/2003 30/12/2011 S 5 f. Start modifying T-bill auction frequency and procedures Mo. F 1/1/2008 30/6/2009 L 5 a. Improve debt reporting and transparency and publish quarterly debt publications XXX Natural Owner Mo. F IMPLEMENTATION: S: Short term M: Medium Term L: Long Term 15
Ministry of Finance – Program Charter 6 Program Title Reform capital markets Program Owner Minister of Finance Program Number FIN-006 Key Stakeholders BSE, Parliament Program Objectives/Description 4 Develop Lebanon's capital markets Key Risks 4 Political risk 4 Institutional risk Requirements Description High Level Work Plan 4 Enhance the functioning of BSE, launch a new website for the BSE and introduce E-trading 4 Enhance trading of share of unlisted companies on BSE’s trading floor 4 Setup the Capital Market Authority organizational structure 4 Issue detailed regulations under the “Capital Markets” law by the Capital Markets authority 4 Set up the “Capital Markets Commission” including specialized financial court 4 Enact the following draft laws: The “Dematerialization of Securities” law, the “Securities Lending” law and the “Insider Trading” law and the “capital Markets” law. 4 Transfer regulatory responsibilities for the BSE from Mo. F to capital markets commission 4 Transfer regulatory responsibility for listing securities on stock exchanges from the BSE to capital markets commission 4 Address aspects of policy and Capital Market development such as privatization of the BSE 4 Develop an Official Stock Market Index Technical Assistance Budget Ministry Team Milestones 4 Available Budget: 4 Complementary Budget: 4 TOTAL BUDGET: - 4 Passage of Capital Markets Law and other laws listed above by Parliament 4 Setting up the Capital Markets Authority 4 Drafting the Regulations for the Capital Markets Authority KPIs 4 Passage of Capital Markets Law Target 4 Completed (Dec. 2007) 16
Ministry of Finance – Paris III Program 6 Initiatives List of Programs and Initiatives Sector Programs and Initiatives- Stakeholders 6. Reform capital markets Implementation Priority 1/1/2008 6 a. Enhance the functioning of BSE, launch a new website for the BSE and introduce E- trading 6 c. Setup the Capital Market Authority organizational structure 6 d. Issue detailed regulations under the "Capital Markets" law by the Capital Market authority 6 e. Setup the "Capital Markets Commission", including a specialized financial court 6 j. Develop an Official Stock Market Index Natural Owner IMPLEMENTATION: S: Short term 31/12/2008 L 1/1/2008 31/12/2008 L 1/1/2008 Mo. F L 1/1/2008 6 h. Transfer regulatory responsibility for listing securities on Mo. F stock exchanges from the BSE to capital markets commission 6 i. Address aspects of policy and Capital Market Mo. F development such as privatization of the BSE 31/12/2008 1/1/2008 6 f. Enact the following draft laws: The "Dematerialization of Mo. F, Parliament Securities" law, the "Securities Lending" law, the "Insider Trading" law and the "Capital Markets” law 6 g. Transfer regulatory responsibilities for the BSE from Mo. F to capital markets commission M 1/1/2008 Mo. F 31/12/2008 1/1/2008 Mo. F, BSE 6 b. Enhance trading of shares of unlisted companies on BSE's trading floor XXX Timeline 31/12/2008 L M: Medium Term L: Long Term 17
Ministry of Finance – Program Charter 7 Program Title Improve the business environment Program Owner Minister of Finance Program Number FIN-007 Key Stakeholders Ministry of Economy and Trade, Kafalat, BDL Program Objectives/Description 4 Improve the business environment and reduce the cost of doing business in Lebanon 4 Improve the competitiveness and creating employment; 4 Encourage the recovery of the private sector in the aftermath of the Israeli war High Level Work Plan 4 Remove mandatory stamping of books and require international accounting standards 4 Expand the role of Kafalat to encompass more economic sectors and raise the ceiling of guaranteed loans to LL 600 million 4 Promote the creation of venture capital funds to facilitate financing Key Risks Milestones 4 (i) Measures to facilitate access to Kafalat loans identified 4 (ii) Ceiling of guaranteed loan raised to LL 600 million 4 (iii) Previous loans for SMEs affected by the war rescheduled and additional grace period granted 4 (iv) Implementation of capital re-injection to replace damaged equipment 4 (v) BADER investments initiated Requirements Description Technical Assistance Budget KPIs 4 Available Budget: 4 Complementary Budget: 4 TOTAL BUDGET: - 4 Relation facilitation between Mo. F and business community Target 4 Laws and decisions clarifying fiscal procedures set and enacted Ministry Team 18
Ministry of Finance – Paris III Program 7 Initiatives List of Programs and Initiatives Sector Programs and Initiatives- Stakeholders 7. Improve the business environment 31/12/2011 1/1/2008 31/12/2008 M 1/4/2005 31/12/2007 S 2/10/2006 31/12/2011 S Mo. F, Mo. ET 7 b. Expand the role of Kafalat to encompass more economic Mo. F, Kafalat, BDL, Mo. ET sectors, and raise the ceiling of guaranteed loans to LL 600 million 7 c. Promote the creation of venture capital funds to facilitate Mo. F, Mo. ET financing Natural Owner Implementation Priority 1/4/2005 7 a. Remove mandatory stamping of books, and require international accounting standards XXX Timeline IMPLEMENTATION: S: Short term M: Medium Term L: Long Term 19
Ministry of Finance – Program Charter 8 Program Title Facilitate trade Program Owner Minister of Finance Program Number FIN-008 Key Stakeholders Ministry of Economy and Trade High Level Work Plan Program Objectives/Description 4 Expedite the clearance of imports, by increasing automation at the port, and lowering the related cost. A one-stop-shop at the Port of Beirut will provide better services to trade and export 4 Facilitate imports 4 Automate operations at Beirut port 4 Lower import costs Key Risks Milestones Requirements Description 4 Revised import processes implemented 4 One stop shop created at the Port of Beirut Technical Assistance Budget 4 Available Budget: 4 Complementary Budget: 4 TOTAL BUDGET: - KPIs 4 N/A Target 4 N/A Ministry Team 20
Ministry of Finance – Paris III Program 8 Initiatives List of Programs and Initiatives Sector Programs and Initiatives- Stakeholders 8. Facilitate trade Timeline 1/1/2008 8 a. Expedite the clearance of imports, by increasing automation at the port, and lowering the related cost. A one-stop-shop at the Port of Beirut will provide better services to trade and export XXX Natural Owner 31/12/2008 1/1/2008 31/12/2008 Implementation Priority Mo. F (Customs), Mo. ET IMPLEMENTATION: S: Short term M: Medium Term M L: Long Term 21
Appendix 4 Detailed Work Plan 4 KPIs 22
Appendix 4 Detailed Work Plan 4 KPIs 23
Rationalize expenditures – KPI FIN 001 -01 4 Rationalize expenditures Program Name 4 Current primary expenditures Formula 4 Capital expenditures Parameters 4 Treasury Expenditures Definition 4 KPI FIN-001 -01 KPI Code 4 MOF Data Source 4 Output 4 Quarterly Reporting Frequency KPI Type 4 Level of spending versus EPCA target KPI Name 4 EPCA projections (dated March 16 th, 2007) Baseline 4 Primary expenditures to meet EPCA targets for all quarters KPI Description 4 EPCA projections- actual spending≈0 Formula Target 4 LBP billion Unit 4 Wages and salaries frozen in real terms 4 Reduction of the size of public sector by attrition 4 Savings on transportation allowance 4 Decline in Government transfer to EDL as a result of power sector reform plan 4 Planned phasing out of some extrabudgetary funds (Namely: COS & DF) 24
Enhance revenues – KPI FIN 002 -01 4 Tax revenues 4 Non-tax revenues 4 Enhance revenues Program Name 4 KPI FIN-002 -01 Formula Parameters Definition KPI Code 4 Output 4 MOF KPI Type KPI Name 4 Tax and non-tax revenues versus EPCA projections Data Source 4 Quarterly KPI Description Reporting Frequency 4 Actual revenues- EPCA projections≈0 Formula 4 EPCA projections (dated March 16 th, 2007) Baseline 4 LBP billion Unit Target 4 Revenues to meet EPCA targets for all quarters 25
Undertake budget and financial management reform – KPI FIN 003 -01 Program Name 4 Undertake budget and financial management reform Formula Parameters Definition 4 KPI FIN-003 -01 KPI Code Data Source 4 Outcome 4 MOF 4 Line ministries 4 Quarterly Reporting Frequency KPI Type KPI Name 4 N/A 4 Budget preparation linked to a medium term expenditure framework (MTEF) 4 Budgets currently prepared on a incremental basis, within 1 year framework and with little planning Baseline KPI Description 4 N/A Formula Unit 4 Completed 4 In-progress 4 Delayed Target 4 Budget that reflects sector priorities and done within 3 year-framework 4 Budget that calculates the true cost of producing outcomes 4 Budget that solves the issue of appropriations and carryovers, complementary period and treasury advances 26
Undertake budget and financial management reform – KPI FIN 003 -02 Program Name 4 N/A 4 Undertake budget and financial management reform 4 KPI FIN-003 -02 Formula Parameters Definition KPI Code 4 Outcome KPI Type KPI Name Data Source 4 Number of line ministries adopting new budget approach where budget preparation is linked to medium term expenditure framework (MTEF) KPI Description Reporting Frequency Baseline 4 N/A Formula Unit 4 Completed 4 In-progress 4 Delayed Target 4 MOF 4 Line ministries 4 Quarterly 4 Ministries prepare their budgets on an incremental base and within 1 year framework 4 Line ministries preparing their budgets to reflect sector priorities and within 3 yearframework 4 Strategies and policies of the spending agencies translated into financial framework 27
Undertake revenue management and administrative reform toward a function-based structure – KPI FIN-004 -01 Program Name KPI Code KPI Type 4 Undertake revenue mgmt and administrative reform toward a function-based structure 4 KPI FIN-004 -01 KPI Name 4 Higher compliance rate 4 Outcome 4 “Compliance rate” enables the Mo. F to evaluate the KPI effectiveness of its new strategies and reorganization Description measures Formula Unit 4 Voluntary compliance rate – (Number of filers *100 ) / (Number of taxpayers required to file) per fiscal period – (Number of payers *100)/(Number of filers who declared an amount >0) per fiscal period – Growth rate of the number of registered taxpayers per fiscal period = [(Number of registered taxpayers for fiscal period n) -(Number of registered taxpayers for fiscal period n-1)]*100/ (Number of registered taxpayers for fiscal period n 1) 4 Enforcement – Number of filers after follow-up *100 ) / (Total number of non filers before follow-up) per fiscal period – (Number of payers after follow-up *100)/(Number of non payers before follow-up) per fiscal period 4 Decreasing rate of discrepancies= – [(Number of taxpayers having discrepancies for fiscal period n-1) - (Number of taxpayers having discrepancies for fiscal period n)]*100/ (Number of taxpayers having discrepancies for fiscal period n 1) 4% Formula Parameters Definition 4 “Number of filers” is the number of taxpayers who filed a tax return 4 “Number of taxpayers required to file” is the number of taxpayers who are required to submit a tax return 4 “Number of payers” is the total number of taxpayers who paid their tax due liability 4 “Number of non payers” is the number of taxpayers who did not pay their tax due liability 4 “Number of filers who declared an amount >0” is the total number of taxpayers who have a tax due liability 4 “Number of non filers” is the number of taxpayers who did not file their tax return 4 “Number of registered taxpayers” is the total number of registered taxpayers in the Taxroll 4 “Number of taxpayers having discrepancies ” is the total number of taxpayers having inaccurate information in their tax returns Data Source 4 SIGTAS: the system of the Ministry of Finance Reporting Frequency 4 Annually 4 Quarterly 4 Voluntary compliance rate – % of filers=95% (VAT Q 4 2006) – % of payers=96% (VAT Q 4 2006) – Growth rate of the nb of registered taxpayers=2. 5% (VAT Q 3 -Q 4 2006) Baseline Target 4 Enforcement – % of filers after follow-up=4. 5% (VAT Q 4 2006) – % of payers after follow-up=36% (VAT Q 4 2005) 4 Decreasing rate of discrepancies= 34% (VAT Q 1 -Q 2 2006) 4 2007: xx % 4 2008: xx % 4 2009: xx % 28
Undertake revenue management and administrative reform toward a function-based structure – KPI FIN-004 -02 Program Name 4 Undertake revenue mgmt and administrative reform toward a function-based structure KPI Code 4 KPI FIN-004 -02 KPI Type 4 Output KPI Name KPI Description Formula Unit Formula Parameters Definition 4 Ministry of Finance Data Source 4 INFOPRO Reporting Frequency 4 2006: Transactions’ processing time = 3 days (Starting business – acquittance…) 4 Improved services 4 “Improved services” allows the Mo. F to evaluate the efficiency of the services provided by the tax administration 4 Annually 4 Periodically Baseline 4 2006: Inquiries’ processing time = 1 day 4 April 2007: satisfied taxpayers=40% 4 2006: 0 % taxpayers registered in the e-services 4 Transactions’ processing time 4 Inquiries’ processing time 4 Ratio of satisfied taxpayers = Number of taxpayers satisfied/population 4 (Number of registered taxpayers in the e-services*100) / Total number of registered taxpayers 4 Dec. 2007 4 Days 4 % 4 Dec. 2008 4 “Transactions’ processing time” is the time needed by the tax administration to accomplish any transaction 4 “Inquiries’ processing time” is the time needed by the tax administration to respond to inquiry 4 “Taxpayers satisfied ” are the taxpayers pleased with the tax adm. services according to surveys undertaken periodically 4 population : sample taken from the taxpayers requesting services 4 “Number of registered taxpayers in the e-services” is the total number of registrations in e-services – Transactions’ processing time = x days – Inquiries’ processing time = x days – x% satisfied taxpayers – x% taxpayers registered in the e-services – Target Transactions’ processing time = x days – Inquiries’ processing time = x days – x % satisfied taxpayers – x % taxpayers registered in the e-services 4 Dec. 2009 – Transactions’ processing time = x days – Inquiries’ processing time = x days – x % satisfied taxpayers – x % taxpayers registered in the e-services 29
Undertake revenue management and administrative reform toward a function-based structure – KPI FIN-004 -03 Program Name KPI Code KPI Type 4 Undertake revenue mgmt and administrative reform toward a function-based structure 4 KPI FIN-004 -03 Formula Parameters Definition 4 Outcome 4 Increased revenues collection KPI Name KPI Description Formula Unit 4 “Amount recovered from the tax returns” is the total amount of money collected from taxpayers filing their tax returns 4 “Amount recovered from audit activities ” is the total amount collected following a tax audit 4 “Amount of arrears recovered” is the total amount collected of tax liabilities that was not paid by the deadline 4 SIGTAS: the system of the Ministry of Finance Data Source 4 “Increased revenues collection” enables the Mo. F to evaluate the effectiveness of its new strategies and reorganization measures 4 Growth rate of the amount recovered from the tax returns per fiscal period = [(amount recovered from the tax returns for fiscal period n) -(amount recovered from the tax returns for fiscal period n-1)]*100/ (amount recovered from the tax returns for fiscal period n-1) 4 Growth rate of the amount recovered from audit activities per fiscal period = [(amount recovered from audit activities for fiscal period n) -(amount recovered from audit activities for fiscal period n-1)]*100/ (amount recovered from audit activities for fiscal period n-1) 4 Decreasing rate of arrears per fiscal period= 4 [(Amount of arrears recovered) *100 / (total arrears at the beginning of the fiscal period) per fiscal period Reporting Frequency Baseline 4 Annually 4 Quarterly 4 Growth rate of the amount recovered from the tax returns=8% (VAT Q 3 -Q 4 2006) 4 Growth rate of the amount recovered from audit activities per fiscal period= 54% (VAT 2005 -2006) 4 Decreasing rate of arrears = 18% (VAT 2006) 4 2007: x% 4 2008: x% 4 2009: x% Target 4% 30
Strengthen debt management – KPI FIN-005 -01 4 Strengthen debt management Program Name 4 KPI FIN-005 -01 Formula Parameters Definition KPI Code 4 Output: Quarterly and monthly debt reports KPI Type 4 MOF Data Source 4 Improve debt reporting KPI Name 4 Publish, first on a quarterly basis, then on a monthly basis, a report on Lebanon debt and KPI debt markets Description Reporting Frequency Baseline 4 Q II 2007 report on debt and debt markets being finalized and to be published by end of August 2007. 4 Report on debt and debt markets published on quarterly base Formula Unit 4 Quarterly, then monthly 4 Completed 4 In progress 4 Delayed Target 31
Strengthen debt management – KPI FIN-005 -02 4 Strengthen debt management Program Name 4 KPI FIN-005 -02 Formula Parameters Definition KPI Code 4 Outcome KPI Type KPI Name KPI Description Data Source 4 Creation of “Higher Council for Debt Management” 4 Prepare for the creation of the “Higher Council for Debt Management” Reporting Frequency Baseline 4 MOF 4 BDL 4 Annually 4 Draft law to establish integrated debt management unit at MOF and to create Higher Council for Debt Management to formalize and enhance coordination between MOF & BDL awaits parliamentary approval. 4 Higher Council for Debt Management created Formula 4 Meetings among stakeholders Target Unit 32
Strengthen debt management – KPI FIN-005 -03 4 Strengthen debt management Program Name 4 KPI FIN-005 -03 Formula Parameters Definition KPI Code 4 Outcome KPI Type KPI Name Data Source 4 Background analysis for a formal debt management strategy 4 Conduct background analysis for preparation of a formal debt management strategy paper KPI Description 4 Develop a formal debt strategy Reporting Frequency Baseline 4 Annually 4 Preparations for developing a formal debt management strategy have been completed with the circulation of a quarterly internal financing strategy report. 4 Debt management strategy completed Formula Unit 4 MOF 4 Parliament 4 Completed 4 In progress 4 Delayed Target 33
Reform Capital Markets – KPI FIN-006 -01 4 Reform capital markets Program Name 4 KPI FIN-006 -01 Formula Parameters Definition KPI Code 4 Output KPI Type Data Source 4 Passage of Capital Markets Law KPI Name Reporting Frequency 4 Monthly 4 July 2007: Delayed KPI Description Baseline 4 Capital market law passed (Completed by Dec. 2007) Formula Unit 4 Completed 4 In progress 4 Delayed Target 34
Improve the business environment – KPI FIN-007 -01 4 Improve the business environment Program Name 4 KPI FIN-007 -01 Formula Parameters Definition KPI Code 4 Output KPI Type KPI Name Data Source 4 Relation facilitation between Mo. F and business community 4 Clarify fiscal control procedures 4 Accelerate public payment for supplies KPI 4 Improve declaration procedures Description 4 Review tax levels and procedures 4 Improve access to information Reporting Frequency 4 Quarterly 4 Need to have well defined fiscal procedures Baseline 4 Laws and decisions clarifying fiscal procedures set and enacted Formula Unit 4 MOF 4 Business unions 4 Meetings with representatives of business unions, heads of departments at MOF 4 Meetings to prepare decisions, laws and procedures Target 35
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