Lessons from the taxi industry to improve Romania’s governance

The first time I came to Bucharest in 2013 the Bank office offered to arrange a pick up from the airport. Being a seasoned traveler, I declined the offer. I reasoned that I had lived and worked in so many countries I could manage the transfer to the hotel without assistance. I was wrong.
 
I picked up my luggage to find a local cab outside the airport. A taxi driver offered me a ride. I didn’t negotiate the price upfront seeing that he had a meter in the car.
 
Twenty minutes later we reached the hotel. The meter read Lei 200 - at the that time about $60. That was over twice the going rate but there was little else I could do. I felt cheated as so many tourists do.
 
I learned from the experience, accepted offers of help from colleagues and paid more attention to rates going forward.
 
About a year later I returned to Bucharest to find a new system in place.   An electronic kiosk had been installed at the airport.  Arriving visitors could now press a button to get an estimated wait time to hail a taxi. I took my ticket. It was a smooth ride.
  
What made the difference? 
 
The new taxi ordering system is now available on mobile phones mirroring, in many ways, the service provided by Uber. Passengers can rate drivers and increase accountability.  
 
Bucharest has gone from being a difficult place to find an honest cab driver to one of the most convenient. 
 
The change has been driven by incentives and improved technology. 

 What are the implications for governance reform?  

The poor experience I encountered on my first trip to Bucharest is much like those that ordinary Romanians experience in dealing with government offices. Romanians stand in line to pay their taxes. Some queue for hours on a monthly or quarterly basis only to reach a small window that is either opaque or covered in leaflets to obscure the government official sitting behind the window maintaining their sense of superiority.   
 
They stand in one line to be told how much they owe and in another to pay it. PwC ranks Romania at 154 out of 183 countries worldwide in ease of paying taxes . Given the difficulty in paying taxes, it is not surprising that Romania raises the second lowest rate of tax compared to GDP .

The tax administration authority (NAFA) maintains a large network of offices around the country. It affects the economic efficiency of the country as it promotes excessive contact between taxpayers and tax officers, leaving open the opportunity for corrupt practices.  
 
Steps, however, have been taken to improve NAFA’s operations - promoting voluntary compliance and reducing the burden to taxpayers.
 
In 2011, a single declaration and payment for taxes and social contributions was introduced, thus reducing the reporting requirements for taxpayers. The introduction of mandatory e-filing for large taxpayers, upgrades to the IT system and strengthened IT management in NAFA also made possible further reductions in the burden of tax compliance.
 
In 2013, the World Bank supported the establishment of a Prime Minister’s Delivery Unit (DU).  Improving tax administration was one of its priorities. In June 2015, the DU tax team trained employees, from nine tax offices in Bucharest and surrounding counties on how to enroll the taxpayers via the  Online Taxpayer Platform. According to DU estimates, online platform can save the taxpayer 12 days per year. 
 
There is still a long way to go.  NAFA needs to reduce the number of physical tax offices, rely more on electronic filling and put in place systems for monitoring and evaluation in order to better track the performance of individual tax offices. They should aslo share best practice across the remaining network.
 
The Bank’s Revenue Administration Project (RAMP)  is supporting all these objectives. 
 
The most important component, the installation of an off-the-shelf comprehensive tax administration IT system, is currently under procurement.

​This is a high-risk, high-reward project that has the ability to dramatically improve tax administration  in Romania.
 
If it is successful, it also has the potential to inform other similar projects in middle and low income countries. 
 
We will continue reporting on this exciting initiative as we go along.
 
Do you know of similar initiatives in other countries? Tell us in the comments.