Public Disclosure Copy The World Bank Implementation Status & Results Report Indonesia Fiscal Reform DPL 2 (P161475) Indonesia Fiscal Reform DPL 2 (P161475) EAST ASIA AND PACIFIC | Indonesia | Macroeconomics, Trade and Investment Global Practice | IBRD/IDA | Development Policy Lending | FY 2018 | Seq No: 1 | ARCHIVED on 21-May-2019 | ISR33698 | Implementing Agencies: Ministry of Finance , Republic of Indonesia, Fiscal Policy Agency, Ministry of Finance Key Dates Key Project Dates Bank Approval Date:31-Oct-2017 Effectiveness Date:22-Jan-2018 Planned Mid Term Review Date:-- Actual Mid-Term Review Date:-- Original Closing Date:30-Jun-2018 Revised Closing Date:30-Jun-2018 Program Development Objectives Program Development Objective (from Program Document) The objective of this operation is to support fiscal sector reforms that will assist the Government of Indonesia to achieve its medium-term economic development and poverty reduction goals. The operation aims to do so through supporting reforms in three key policy areas: Pillar A: Improving the Quality of Spending - by improving the composition of spending, budget execution and efficiency of spending; Pillar B: Strengthening Revenue Administration - by increasing tax administration efficiency, compliance management and audit capability, and reducing the cost of paying taxes; Pillar C: Enhancing Tax Policy - by increasing revenue potential and economic efficiency of tax policy. This Development Policy Operation is part of the World Bank Group's overall support to the Government's efforts to improve revenue collection and the quality of spending, which are central to its overall development agenda. PHRPDODEL Overall Ratings Name Previous Rating Current Rating Progress towards achievement of PDO  --  Moderately Satisfactory Overall Implementation Progress (IP)  --  Moderately Satisfactory Overall Risk Rating  --  Substantial Implementation Status and Key Decisions The Overall Implementation Progress (IP) of this operation and the progress towards achievement of PDO is Moderately Satisfactory. 5/21/2019 Page 1 of 10 Public Disclosure Copy Public Disclosure Copy The World Bank Implementation Status & Results Report Indonesia Fiscal Reform DPL 2 (P161475) Risks Systematic Operations Risk-rating Tool Risk Category Rating at Approval Previous Rating Current Rating Political and Governance  Substantial  --  Substantial Macroeconomic  Moderate  --  Moderate Sector Strategies and Policies  Substantial  --  Substantial Technical Design of Project or Program  Moderate  --  Moderate Institutional Capacity for Implementation and Sustainability  Substantial  --  Substantial Fiduciary  Moderate  --  Moderate Environment and Social  Moderate  --  Moderate Stakeholders  Moderate  --  Moderate Other  --  --  -- Overall  Substantial  --  Substantial Results Results Indicators PHINDIRITBL  Result Indicator A1: Share of central government budget allocated to infrastructure, social assistance and health after fuel subsidy reforms: (Percentage, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 19.00 -- 28.70 31.40 Date 31-Dec-2014 -- 31-Dec-2017 31-Dec-2018 Comments Sub indicators should not be summed up to provide an aggregate. 5/21/2019 Page 2 of 10 Public Disclosure Copy Public Disclosure Copy The World Bank Implementation Status & Results Report Indonesia Fiscal Reform DPL 2 (P161475) PHINDIRITBL  a) Share of central government budget allocated to infrastructure (Percentage, Custom Breakdown) Baseline Actual (Previous) Actual (Current) End Target Value 12.30 -- 18.40 19.50 Date 31-Dec-2014 -- 31-Dec-2017 31-Dec-2018 PHINDIRITBL  b) Share of central government budget allocated to social assistance (excluding health insurance for the poor and temporary compensation for fuel price increase) (Percentage, Custom Breakdown) Baseline Actual (Previous) Actual (Current) End Target Value 2.70 -- 3.70 4.50 Date 31-Dec-2014 -- 31-Dec-2017 31-Dec-2018 PHINDIRITBL c) Share of central government budget allocated to health (including health insurance for the poor) (Percentage, Custom Breakdown) Baseline Actual (Previous) Actual (Current) End Target Value 4.00 -- 6.60 7.40 Date 31-Dec-2014 -- 31-Dec-2017 31-Dec-2018 PHINDIRITBL  Result Indicator A2: Time taken for central government monthly budget realization data to be publicly available (after the end of the month) (Months, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 2.00 -- 0.50 0.50 Date 31-Dec-2014 -- 31-Oct-2018 31-Dec-2018 5/21/2019 Page 3 of 10 Public Disclosure Copy Public Disclosure Copy The World Bank Implementation Status & Results Report Indonesia Fiscal Reform DPL 2 (P161475) PHINDIRITBL  Result Indicator A3: Availability of the enabling regulatory framework for Availability Payment Contracts for infrastructure projects with the private sector: (Yes/No, Custom) Baseline Actual (Previous) Actual (Current) End Target Value N -- Y Y Date 31-Dec-2014 -- 30-Dec-2016 30-Dec-2016 PHINDIRITBL  Result Indicator A4: Proportion of Ministry of Public Works and Housing budget (total) delivered through multi-year contracts: (Percentage, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 7.00 -- 41.70 18.00 Date 31-Dec-2014 -- 31-Oct-2018 31-Dec-2018 PHINDIRITBL  Result Indicator A5: Deviation between indicative line ministry expenditure ceiling in a new budget and the forward estimate in the earlier planned budget: (Percentage, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 22.00 -- 2.90 21.00 Date 31-Dec-2014 -- 30-Sep-2018 31-Dec-2019 PHINDIRITBL Result Indicator A6: Proportion of the value of contractual package for the budget year being procured by the Ministry of Public Works and Housing in the first semester (Percentage, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 70.00 -- 98.00 90.50 Date 31-Dec-2014 -- 31-May-2018 31-Dec-2018 5/21/2019 Page 4 of 10 Public Disclosure Copy Public Disclosure Copy The World Bank Implementation Status & Results Report Indonesia Fiscal Reform DPL 2 (P161475) PHINDIRITBL  Result Indicator A7:a) Proportion of districts meeting the requirement to spend 25% of DAU and revenue sharing allocations on infrastructure: (Percentage, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 42.00 -- 46.00 60.00 Date 31-Dec-2016 -- 31-Dec-2018 31-Dec-2019 PHINDIRITBL  b) Percentage of DAK physical realization in infrastructure sectors at the end of fiscal year (Percentage, Custom Breakdown) Baseline Actual (Previous) Actual (Current) End Target Value 60.50 -- 74.00 71.00 Date 30-Nov-2016 -- 31-Dec-2017 31-Dec-2019 PHINDIRITBL  c) Average improvement in NER for Junior Secondary School for Districts that received DID: (Percentage, Custom Breakdown) Baseline Actual (Previous) Actual (Current) End Target Value 0.06 -- 0.17 0.08 Date 31-Dec-2016 -- 31-Dec-2018 31-Dec-2019 PHINDIRITBL  Result Indicator A8: Proportion of contracted value of DAK by July of each year (Percentage, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 67.00 -- 93.50 80.00 Date 31-Dec-2014 -- 31-Dec-2018 31-Dec-2019 5/21/2019 Page 5 of 10 Public Disclosure Copy Public Disclosure Copy The World Bank Implementation Status & Results Report Indonesia Fiscal Reform DPL 2 (P161475) PHINDIRITBL  Result Indicator B1: Share of monthly VAT returns filed electronically (Percentage, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 0.00 -- 100.00 90.00 Date 31-Dec-2014 -- 31-Oct-2018 31-Dec-2018 PHINDIRITBL  Result Indicator B2: VAT refunds audited based on objective risk criteria (Text, Custom) Baseline Actual (Previous) Actual (Current) End Target VAT risk profiles VAT risk profiles developed; a No VAT risk profiles in developed; a sample of sample of VAT Value place; all VAT refund -- VAT returns are chosen returns are requests are audited for pilot use of new risk- chosen for pilot based system. use of new risk- based system. Date 31-Dec-2014 -- 31-Dec-2018 31-Dec-2018 PHINDIRITBL  Result Indicator B3: Share of annual individual income tax filed electronically. (Percentage, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 27.00 -- 77.10 48.00 Date 31-Dec-2015 -- 31-Dec-2017 31-Dec-2017 PHINDIRITBL  Share of annual corporate income tax returns filed electronically (Percentage, Custom Breakdown) Baseline Actual (Previous) Actual (Current) End Target Value 2.00 -- 64.39 57.00 Date 31-Dec-2015 -- 31-Dec-2017 31-Dec-2017 5/21/2019 Page 6 of 10 Public Disclosure Copy Public Disclosure Copy The World Bank Implementation Status & Results Report Indonesia Fiscal Reform DPL 2 (P161475) PHINDIRITBL  Result Indicator B4: Number of taxpayers with multiple/duplicate IDs that can be used to file returns (Number, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 500,000.00 -- 42,067.00 2,999.00 Date 31-Dec-2014 -- 31-Dec-2018 31-Dec-2018 Comments In anticipation of the new COTS based-core tax IT system, DGT began the preparation for data migration and data cleansing. One of the issues they were looking into was the number of taxpayers with multiple/duplicate IDs that can be used to file returns. While they have made substantial progress and reduced the multiple ID cases to 42,067 from 500,000 over a period of 4 years, it still failed to meet the target of less than 3000 cases by the end of 2018. This was the best result DGT could have achieved using the current IT system, which required cross-checking multiple taxpayer ID against the status of taxpayer (active or inactive) based on several criteria, such as last tax payment and return filing, status of tax payable, and required also manual intervention by local tax offices. The DGT Head Office would have to notify tax offices and then the authorized units would have to contact the taxpayers for clarification. Although this process is time consuming, DGT hopes to further reduce the multiple ID cases before COTS system is implemented. PHINDIRITBL  Result Indicator B5: Average time taken to receive land asset information requested by DGT for audit use (Days, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 5.00 -- 1.00 1.00 Date 31-Dec-2014 -- 31-Oct-2018 31-Dec-2018 Comments Land asset data: Baseline (2014): 5 days, limited to local land agency data; Target (by end 2018): 1 day, nation-wide land agency data. Financial information: Baseline (2015): no data; Final Target: all financial institutions to submit financial data annually. 5/21/2019 Page 7 of 10 Public Disclosure Copy Public Disclosure Copy The World Bank Implementation Status & Results Report Indonesia Fiscal Reform DPL 2 (P161475) PHINDIRITBL  Submission of financial information to DGT (number of times a year) (Number, Custom Supplement) Baseline Actual (Previous) Actual (Current) End Target Value 0.00 -- 1.00 1.00 PHINDIRITBL  Result Indicator C6: Anti-tax base erosion measures in place (Text, Custom) Baseline Actual (Previous) Actual (Current) End Target Final Target: (2019) Increase in anti-tax base Increase in anti-tax base erosion erosion measures in measures in Baseline: (2017) Few anti- place, including LoB place, including Value tax base erosion measures -- clause in treaties and LoB clause in in place: only CFC rule requirements for treaties and standardized requirements documentation. for standardized documentation. Date 29-Dec-2017 -- 19-Jun-2017 31-Dec-2019 PHINDIRITBL  Result Indicator C7: Number of new APAs concluded under old rules: (Number, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 3.00 -- 18.00 7.00 Date 30-Dec-2016 -- 01-Feb-2019 31-Dec-2019 Comments Target for MAP was not correctly conceived in DPL2. In 2017/2018, DGT only received a total of 42 MAP case applications. To-date in 2019, they have received another 15, bringing the total-to- date to 57. Therefore, that target to date is not possible to achieve, as DGT does not have 70 applications to process. If we instead look at applications concluded as a share of received, we can see that DGT has substantially improved, reaching 120% of APA applications (as dealing with backlog as well as new applications), and 65% of MAP applications, as compared to 8% of APA and 38% of MAP applications under old rules. 5/21/2019 Page 8 of 10 Public Disclosure Copy Public Disclosure Copy The World Bank Implementation Status & Results Report Indonesia Fiscal Reform DPL 2 (P161475) PHINDIRITBL  Number of new MAP cases concluded under new rules (Number, Custom Supplement) Baseline Actual (Previous) Actual (Current) End Target Value 33.00 -- 37.00 70.00 PHINDIRITBL Result Indicator C8: 5-year moving average rate of growth of nominal N-O&G Income Tax revenue 2012-2017 (Percentage, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 8.30 -- 14.20 14.20 Date 30-Dec-2016 -- 31-Dec-2018 31-Dec-2019 Comments Baseline was revised (average 2012-2016) from 11.1 percent to 8.3 percentage ( a decrease of 2.8 percentage points) in line with revised Government statistics following audits. Accordingly, the Target reflecting the Post-Reform Average (2017-19), was reduced proportionally from 17 percentage to 14.2 percentage (decrease of 2.8 percentage points) Overall Comments Data on Financial Performance Disbursements (by loan) Project Loan/Credit/TF Status Currency Original Revised Cancelled Disbursed Undisbursed Disbursed P161475 IBRD-87900 Closed USD 300.00 300.00 0.00 300.00 0.00 100% Key Dates (by loan) Project Loan/Credit/TF Status Approval Date Signing Date Effectiveness Date Orig. Closing Date Rev. Closing Date P161475 IBRD-87900 Closed 31-Oct-2017 27-Nov-2017 22-Jan-2018 30-Jun-2018 30-Jun-2018 5/21/2019 Page 9 of 10 Public Disclosure Copy Public Disclosure Copy The World Bank Implementation Status & Results Report Indonesia Fiscal Reform DPL 2 (P161475) Tranches Restructuring History There has been no restructuring to date. Related Operations P156655-Indonesia Fiscal Reform DPL ,P167297-Indonesia Fiscal Reform DPL 3 5/21/2019 Page 10 of 10 Public Disclosure Copy