As Vietnam gradually became a middle-income country during the early 2000s, its tax agency struggled to keep up. In the decade and a half following the Communist Party–led government’s 1986 decision to establish a market-based economy, local entrepreneurs launched businesses, foreign investors poured into the country, and the average annual rate of economic growth soared to 7.5%. But during the same period, tax revenues declined as the General Department of Taxation (GDT), which previously collected almost all of the country’s taxes from a small group of state-owned enterprises, strove to keep pace with the economic dynamism. In 2004, the department established an internal reform team and adopted a strategy to make sure those who could pay covered their fair share of the cost of government services. The GDT worked with the finance ministry’s tax policy department and the parliament to implement a raft of legal changes. The department then reorganized each of its 758 tax offices along functional lines, rolled out a new IT system, improved staff training, and created a unit to bolster taxpayer compliance. It later adopted a personal income tax and tried—sometimes unsuccessfully—to close exemptions created earlier to attract foreign investors. Although its collection levels began to plateau after 2010, in the decade or so from 2004 to 2015 the GDT increased the number of registered taxpayers in the country to 15 million from 2 million and tripled the amount of taxes it collected annually, maintaining one of the highest tax-to-GDP ratios in East Asia.

Leon Schreiber drafted this case study on the basis of interviews conducted in Hanoi, Vietnam in May 2018. Case published in August 2018. 

To view a short version of the case, please ckick here

After the 1994 genocide that claimed hundreds of thousands of lives, Rwanda’s tax collection collapsed to $132 million in 1996 from $225 million in 1990. Aside from its desperate need for money to pay for reconstruction, the new unity government, led by Paul Kagame’s Rwandan Patriotic Front, was also determined to break its dependence on foreign donors by becoming entirely self-funding. To do that, Kagame’s government had to convince a traumatized and distrustful public to pay its fair share of taxes. In 1998, the government replaced the existing tax and customs departments with the Rwanda Revenue Authority (RRA), a semiautonomous tax agency. The RRA overhauled tax collection procedures, increased staff capacity, improved information management, and launched a massive and sustained public education campaign in an effort to build a new social contract. As a result, in 2017 Rwanda collected in three weeks the same amount of tax it had collected annually a dozen years earlier. From 1998 to 2017, Rwanda’s tax-to-GDP ratio improved from 10.8% to 16.7%, and total tax revenues collected grew more than 10-fold to $1.3 billion. Moreover, from 2007 to 2017 alone, the number of registered taxpayers grew 13-fold—from 26,526 to 355,128—though Rwanda was one of the world’s poorest countries and most of its labor force of 6.3 million still had incomes below the threshold that made them tax eligible. By 2017, the government financed 62% of its annual budget from domestic tax revenues, up from just 39% in 2000. The country was on its way to ending donor dependence.

Leon Schreiber drafted this case study based on interviews conducted in Kigali, Rwanda in March 2018. Case published May 2018.

To view a short version of the case, please click here

In November 2005, Nitish Kumar became chief minister of one of India’s poorest states. The third-largest state by population, Bihar lagged behind other states in growth and development but scored high in corruption, lawlessness, and dismal service delivery. Mismanagement of financial resources, obsolete methods of data entry and reporting, a low-skilled workforce, insufficient transparency, and scarce accountability hindered service delivery. As head of state government, Kumar launched a series of reforms that applied information and communications technology to streamline operations, boost revenues, and improve the government’s responsiveness to citizens’ needs. By 2012, Bihar had earned national and regional acclaim for its technology-related gains, and the government of India recognized the turnaround through e-governance awards. Kumar’s efforts earned him the nickname Sushasan Babu, or Mr. Good Governance. Still, some reforms did not go far enough, and significant limitations remained: lack of integration among information and communications systems prevented proper coordination across departments; civil servants did not embrace all technology-related initiatives; and lack of electricity and Internet connectivity in many areas prevented citizens from taking full advantage of the services.

Juliette John drafted this case study in May 2014 while at Princeton University’s Woodrow Wilson School on leave from the UK’s Department for International Development.  The case study was updated by Rushda Majeed and Pallavi Nuka following interviews conducted by Rushda Majeed in Patna, Bihar in August, 2014.  Three separate ISS case studies—Coalition Building in a Divided Society, Clearing the Jungle Raj, and Reviving the Administration,—outline Nitish Kumar’s broader efforts to build a coalition for reform, improve law and order, and resuscitate Bihar’s administration, respectively.

Associated Interview(s):  Anup Mukerji

A complex paper-based city tax collection system made Rio de Janeiro a difficult environment for business and a source of lost revenue when Eduardo Paes became mayor in 2009. Elected on a promise to set the city’s fiscal house in order, Paes planned to implement an electronic invoicing system based on similar programs piloted in other Brazilian cities. A recent constitutional amendment required all levels of Brazil’s federal system of government to ease the burdens of the country’s tax system. Paes reasoned that the potential efficiency gain from a new system was among the few routes available for increasing revenue. His team had to overcome significant challenges to implement the new system and ensure participation by consumers in monitoring tax payments. Strong political and technical leadership, collaboration, and good design helped to successfully implement the new system, called Nota Carioca. This case study offers other governments at the national or subnational levels useful lessons in improving revenue administration and implementing reforms that feature information technology, stakeholder communication, and partnerships.
 
Neil Fowler drafted this case study based on interviews conducted in Rio de Janeiro, Brazil, in March 2014. The case was prepared by ISS in partnership with the World Bank as part of the Bank’s Science of Delivery initiative. Case published July 2014.