Haiti—Key Elements of the Post-Earthquake Strategy

for Revenue Administration and Fiscal Policy

République d'Haïti

I. BACKGROUND

1. Improving domestic revenue mobilization has been a key challenge in Haiti. At about
11 percent of GDP in FY2009, Haiti's revenue level remains relatively low, in part due to the complex
tax system with many exemptions, and a weak revenue administration. The authorities indicated
their determination to raise revenue by improving the equity of the tax system and actively
combating tax evasion. Prior to the January 12 earthquake, the authorities' objective was to raise
revenue to close to 13 percent of GDP by FY 2012 through a revision of the tax system and
improvements in tax administration. Revenue collection during the first quarter of FY2010 (3.5
percent of GDP) was fully in line with these revenue targets.

2. The January 12 earthquake was a major setback on Haiti's revenue mobilization

strategy. The main buildings --both tax administration and customs headquarters, the large
taxpayer office (LTO), and others operational units -- have collapsed or are seriously damaged. For
the tax administration, 1300 people out of 1920 are now without office. Twenty-five people are
confirmed dead, including the head and four other senior managers. For both the tax and custom
administration, only 60 percent of pre-earthquake employees are accounted for. There is no
information about the others. Revenue administration employees are still traumatized. Many have
lost their homes, and sometimes family members. Many still lieave in the streets, sleeping in tents or
in their cars. After each tremor, employees become fearful and anxious and leave offices to go
home.

3. Both tax and customs administrations have restarted operations and are
progressively recovering their capacity to collect revenue despite very difficult
working conditions. Since February, the tax administration restarted basic operational functions
for the LTO -- it has only registered the tax forms of 84 taxpayers out of 500. The tax authorities are
trying to identify large taxpayers that are still in business. Revenue collection has increased from
January to March from 25 percent to almost 50 percent of pre-earthquake targets. For the entire
fiscal year, revenue collection could well exceed 50 percent the budgeted level. Audits have been
delayed for many months, as the administration is still operating in the context of an emergency
situation. Exemptions have increased with the jump in humanitarian assistance. A large part of
imports arrives through the Dominican Republic and the inability to control the border has
contributed to the increase in fraud. The main challenges are on the management infrastructure,
including office space with the adequate information systems and human resources.
II. TAX AND CUSTOMS ADMINISTRATIONS

4. The authorities have requested technical assistance (TA) from the IMF to help
design a strategy to rebuild a more modern and efficient revenue administration. An
initial assessment of the situation has been done and key areas of the reform strategy identified.
Priority is to restore basic functions and modernize them. . The main objective of our strategy is to
reorganize the revenue administration focusing on fiscal missions, segmentation of taxpayers,
computerization, rationalization of local and regional networks, tighter controls, especially at the

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 Haiti—Key Elements of the Post-Earthquake Strategy
for Revenue Administration and Fiscal Policy

border with the Dominican Republic, and greater monitoring and accountability through a design
and publication of performance indicators. For the success of this strategy, a better coordination is
necessary with other TA partners, including Canada, which had launched prior to the earthquake a
significant TA project to modernize revenue administration.

5. Efforts to strengthening the customs and tax administrations will continue in the
coming months. Many ongoing efforts were launched before the earthquake and the underlying
strategy may have to be revised. They focused on increasing the transparency of fiscal procedures
through the adoption of a tax procedures code, which was prepared before the earthquake, and
despite the lack of office space, increasing cooperation and data exchange between the tax and
customs administrations to help reduce tax evasion. Implementation of the new customs code will
streamline procedures and provide flexibility in the creation of customs control posts. Adoption of
the tax administration organic law and the resumption of the above-mentioned Canadian-led
project will further strengthen revenue administration. Publication of performance indicators will
enhance accountability and ensure that revenue administration efforts result in significant increases
in revenue collection. The authorities and IMF staff already agreed on an initial set of basic
performance indicators that will have to be published regularly to better monitor the performance of
the revenue administration (see Tables 3 and 4).

III. TAX POLICY

6. The authorities will request IMF TA to help design a comprehensive tax reform.
The reform would focus on simplifying the tax system, rationalizing exemptions and privileges in line
with the authorities' reconstruction strategy, and broadening the tax base. These reforms initiatives
would culminate in the approval of a new tax code in the coming years, which will also enhance the
transparency of the tax system.
7. Selected tax policy measures have been taken recently or are under serious
consideration. More than a third of tariff lines were raised on October 1, of which 60 percent were
brought to the CARICOM common external tariff and 40 percent brought closer to this level. This
contributed to strong revenue performances in the first quarter of FY 2010 as pre-earthquake
estimates suggested that this measure could have yielded 0.7 percent of GDP for the whole year. A
tax on incoming international phone calls is still under consideration as well as a car registration fee.
A passport fee was introduced in FY2009, raising a limited amount of revenue.

IV. POSSIBLE REVENUE ENHANCING MEASURES

8. The authorities are currently discussing possible revenue-enhancing measures for

the next two years mentioned below:

I. ADMINISTRATIVE MEASURES

Reinforcement of the Tax authority (Direction Générale des Impôts)

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Ministère de l'Économie et des Finances (MEF) 2 mefinfo@mefhaiti.gouv.ht /www.mefhaiti.gouv.ht
 Haiti—Key Elements of the Post-Earthquake Strategy
for Revenue Administration and Fiscal Policy

• Implementation of a data management system (fiscal files for taxpayers), to broaden the tax
base (Linking data DGI/AGD/ONA/MCI) ;
• Implementation of optimization programs (tax recovery …); and management program for
tax arrears;
• Reorganization of the Tax Authority will strive to enhance efficiency :i) separate central
functions (liquidation, verification, investigation and information) from operational functions
(creation of tax collection centers); ii) facilitation of voluntary payment through awareness
and information programs, implementation of assistance mechanisms to taxpayers, online
filing, payment by bank transfer, simplified forms;
• Rationalization of Tax Authority personnel: implementation of customized training to
facilitate application of proposed models;
• Implementation of monitoring and follow-up processes; (performance indicators, evaluation
and follow-up).

Reinforcement of Customs Administrations

• Implementation of procedure management and data management systems; (DGI, MCI)
(agreement with partner customs agencies USA, DR);
• Implementation of a unit for processing and management of customs statistics;
• Continuation of Sydonia++ implementation program;
• Rationalization of Customs Administration (AGD) personnel: implementation of customized
training to facilitate application of proposed models;
• Fitting out of customs offices around the provinces and / or facilitate establishments of
entrepot sous douane

II. Modernization of fiscal system

• Drafting the fiscal legislation reform taking into account objectives for reconstruction,
economic growth using a simple, equitable and profitable fiscal system to achieve fiscal
pressure of at least 15%;
• Modernization of customs code and tariff (facilitation and generalization of procedures).

III. Reinforcement of mechanisms for control and monitoring of tax administrations

• Rationalization of allowance and management of exemptions and privileges;
• Reinforcement of mechanisms for control and monitoring of the Fiscal Inspection
Department (joint auditing; monitoring of performance indicators);
• Reinforcement of autonomous capacity to analyze tax and customs data by DEE and DIF with
the appointment of a macro fiscal expert.

5, Ave. Charles Sumner - Immeuble 2 • Tél.: (509) 2946-4041 / 2946-4040 / 2244-4141

Ministère de l'Économie et des Finances (MEF) 3 mefinfo@mefhaiti.gouv.ht /www.mefhaiti.gouv.ht
 Haiti—Key Elements of the Post-Earthquake Strategy
for Revenue Administration and Fiscal Policy

USE FOR BUDGET SUPPORT

EXERCISE 2009-2010

5, Ave. Charles Sumner - Immeuble 2 • Tél.: (509) 2946-4041 / 2946-4040 / 2244-4141

Ministère de l'Économie et des Finances (MEF) 4 mefinfo@mefhaiti.gouv.ht /www.mefhaiti.gouv.ht
 Haiti—Key Elements of the Post-Earthquake Strategy
for Revenue Administration and Fiscal Policy

5, Ave. Charles Sumner - Immeuble 2 • Tél.: (509) 2946-4041 / 2946-4040 / 2244-4141

Ministère de l'Économie et des Finances (MEF) 5 mefinfo@mefhaiti.gouv.ht /www.mefhaiti.gouv.ht
 Haiti—Key Elements of the Post-Earthquake Strategy
for Revenue Administration and Fiscal Policy

5, Ave. Charles Sumner - Immeuble 2 • Tél.: (509) 2946-4041 / 2946-4040 / 2244-4141

Ministère de l'Économie et des Finances (MEF) 6 mefinfo@mefhaiti.gouv.ht /www.mefhaiti.gouv.ht