Supervision of the Development Of VAT E-Invoice System for General Department for Taxation

The project aimed to automate the current manual process for Value-Added Tax (VAT) and improve evasion detection. The proposed system would issue electronic VAT invoices, enhance evasion detection, facilitate third-party information sharing, and provide reporting capabilities. The BPI project has provided support to the GDT in facilitating paying taxes in Mongolia over the last two years. Building on the e-Signature process started by GDT in 2011 with USAID support, the BPI project provided capacity building in taxpayer services, specialized technical assistance on IT architecture for tax e-Filing, and development of a new tax e-Payment system. In January 2015, BPI and GDT jointly identified a local firm to develop a VAT E-Invoice system through a competitive procurement process. The VAT E-Invoice system is expected to meet the detailed requirements for issuance of electronic VAT invoices, evasion detection improvement, third-party information sharing, reporting, and other functional and non-functional requirements. The system will automate the current manual process for VAT, which is submitted on paper-based invoices. Taxpayers request VAT invoices from their local tax offices, and tax offices pass these requests to GDT headquarters, which requisitions printed VAT documents from authorized distributors. The proposed VAT E-Invoice system will help GDT focus its efforts toward high-risk areas to address the issues of VAT tax evasion and fraudulent VAT claims. In recent years, it has become common to intentionally file VAT incorrectly by establishing fraudulent legal entities. The GDT and the police are working actively to detect and eliminate these fraudulent activities. The system will also help to prevent the loss of revenue to the Government of Mongolia and its citizens. The assignment involved reviewing the second deliverable by the subcontractor engaged in the project. A significant re-factoring in both the data model and system architecture of the system was required due to mis-alignment with GDT strategic direction and lack of alignment with National Data Center security and deployment practices. Working collaboratively with the subcontractor and the GDT, these issues were addressed. The second deliverable can be deemed to be accepted at this point. Additional issues were discovered, including the lack of licensing of Oracle products at GDT. Various scenarios were explored, and budget estimates were developed. The local Oracle representative was contacted for guidance, and the architecture was adjusted to conform to the budget realities of the project. This process is ongoing currently. USAID had previously performed an ADS 548 Assessment of this project, and the findings and recommendations were reviewed and deficiencies addressed. The adjustments made have been significant but have brought the project in alignment with good technical practice and strategic directions. The subcontractor is fully in the development phase of the project, and some preliminary product demos have been done for GDT. Feedback is being solicited, and there is significant work to do to deliver on time for the project to meet its very tight timelines.