Preliminary assessment of the first payment request of Romania

2. Annex with the following documents: a) copy and link to the publication in the national public procurement platform (SICAP); b) copy of the signed contract ( “Reimbursable Advisory Services Agreement (RAS) agreement”); c) extract of the relevant parts of the technical specifications/terms of reference of the project proving alignment with the description of the milestone and the reform in the CID (technical specifications include and are referred to as “RAS agreement”, “amendment to the RAS agreement” and “ToR”); The authorities also provided: 3. Report No 3785/14.12.2021 from the Ministry of Labour and Social Solidarity describing the reasons and procedure for cancelling the call for tender (hereafter “annulment report”). 4. A pension policy note developed by the World Bank in May 2021 (hereafter “policy note”), and 5. Memo Nr.53/DIB/28.12.2021, sent by the Ministry of Labour and Social Solidarity to the Secretariat General of the Government, signed by the Prime Minister, which summarises the discussions on the call for tender and proposes to sign a RAS agreement with the World Bank (hereafter “memo”). Analysis: The Commission finds that the Reimbursable Advisory Services Agreement (RAS) signed with the technical assistance provider addresses all the requirements from the Council Implementing Decision and its Annex, and the milestone is therefore satisfactorily fulfilled. Specifically:  “Signature of the technical assistance contract with the selected entity to prepare analysis and proposals for a reform of the pensions system - general regime and special schemes – consistent with the principles pledged in the national recovery and resilience plan”. o Following the requirements in the CID Annex, Romania initially published a call for tender on 22 October 2021. Since the call was unsuccessful, Romania directly awarded the contract to the World Bank, in line with national legislation. The cover note specifies that according to the provisions of art. 104 of Law 98/2016, article transposing art. 32 paragraph 2 letter a) of Directive 2014/24/EU, the contracting authority has the right to apply the negotiated procedure without prior publication of a contract notice for the award of public service contracts if in an open tender procedure, no tender nor request for participation has been submitted or only inappropriate offers or requests to participate have been submitted, provided that the initial conditions of the acquisition are not substantially altered and, at the request of the European Commission, a report is submitted to it. o The title of the Reimbursable Advisory Services Agreement (RAS) is “Supporting the Operationalization of Social Protection Reforms in the National Recovery and Resilience Plan”, therefore making direct reference to the principles pledged in the national recovery and resilience plan. Furthermore, page 2 of the Reimbursable Advisory Services Agreement (RAS) mentions that “The Client has requested the 18  Bank to provide to the Client reimbursable advisory services (…) to provide support to the Client in making operational key social reforms of Romania’s National Recovery and Resilience Plan (…)”. o The amendment to the Reimbursable Advisory Services Agreement (RAS) specifies that the World Bank will be “providing proposals on reform options to the legislative framework to inform the Client’s preparation of the revised pension law, including preparation of analysis of reform options (…)” (paragraph 4.2 (iii)); and that the World Bank will be “providing proposals on reform options of the legislative framework in order to reduce special pension expenditure (…)” (paragraph 4.3). In addition, the table under point 2 of the amendment to the Reimbursable Advisory Services Agreement (RAS) clearly outlines as deliverables “report on analysis, impact assessment, and recommendations for reforms of special pensions” and “report on analysis, impact assessment, and recommendations for reforms to the public pension system (…)”.  “Technical assistance shall include an impact assessment of the different reform options proposed (long-term projections)”. o The amendment to the Reimbursable Advisory Services Agreement (RAS) specifies that the World Bank will provide “(…) an impact assessment on up to two comprehensive reform options selected by the Client” (paragraph 4.2 (iii)); and “(…) an impact assessment on up to two comprehensive reform options selected by the Client for reducing special pension expenditures (…)” (paragraph 4.3 (iii)). Reform options shall be in line with all the requirements for the reform outlined in the Council Implementing Decision Annex, as the amendment to the Reimbursable Advisory Services Agreement (RAS) specifies that the World Bank will be “Providing support to inform the Client’s preparation of the drafting of the revised law governing the pension system (replacing the provisions in law 127/2019 and taking into account the provisions in the CID)” (paragraph 4.2).  “The technical assistance provider shall support the drafting of the pension reform.” o The amendment to the Reimbursable Advisory Services Agreement (RAS) specifies that the World Bank will be “Providing support to inform the Client’s preparation of the drafting of the revised law governing the pension system (…) taking into account the provisions in the CID” (paragraph 4.2). Full reference to the Council Implementing Decision is included under point 3 of the amendment to the RAS agreement. This will ensure that the elements of the new pension law (milestone 214, Q4 2022) outlined in the description of measures 211 and 214 in the Council Implementing Decision Annex, are covered by the Reimbursable Advisory Services Agreement (RAS). Commission Preliminary Assessment: Satisfactorily fulfilled Number: 212 Related Measure: Reform of the public pension system Name of the Milestone: Entry into force of a minister’s order setting up a monitoring committee in charge of reviewing, with the support of the technical assistance provider the pension system and the policy interventions in the pension system Qualitative Indicator: Provision in the Common ministerial order indicating Time: Q4 2021 the entry into force of the Common ministerial order. Context: The underlying reform (Component 8, Reform 6) involves the adoption of a new law on the public 19 pension system, with the input of technical assistance, which is going to replace the Law 127/2019. The objective of the reform is to ensure fiscal sustainability in an environment of ageing population, to correct inequities, to ensure the sustainability, predictability and adequacy of the system and respect the contributory principle in relation to the beneficiaries of pension entitlements. This milestone requires a monitoring committee in charge of reviewing the pension system and policy interventions in the pension system. It is one of the initial steps in the implementation of the related reform (Component 8, Reform 6), together with milestone 211 (also in Q4 2021), concerning the contracting of technical assistance for the pension reform. The next steps consist of the fulfilment of milestones 213 (Q1 2022), 214 (Q1 2023) and 215 (Q4 2022), regarding the regulatory framework of Pillar 2 pensions, and the legislative frameworks for the general pension and special pension systems respectively. Evidence provided: In line with the verification mechanism set out in the Operational Arrangements, the following evidence was provided: 1. Copy of the publication in the Official Journal No. 1246 on 30 December 2021 of the Joint Ministerial Order No. (Ministry of Finance No. 1593/29.12.2021 and Ministry of Labour and Social Solidarity No. 1239/27.12.2021). 2. Summary document duly justifying how the milestone was satisfactorily fulfilled (“Cover Note”). Analysis: The Commission finds that the entry into force of the Joint Ministerial Order setting up a monitoring committee in charge of reviewing, with the support of the technical assistance provider, the pension system and the policy interventions in the pension system, addresses all the requirements from the Council Implementing Decision and its Annex, and the milestone is therefore satisfactorily fulfilled. Specifically:  The monitoring committee (“the Committee”) has been set up through a Joint Ministerial Order (Ministry of Finance and Ministry of Labour and Social Solidarity), which was published in the Official Journal issue no. 1246/December 30th, 2021.  The Committee will be composed of members and invitees (Art. 2 (1) of the Joint Ministerial order), will be led by the Minister for Labour and Social Solidarity (Art. 2 (2)), and its board will be composed as follows: o Minister of Labour and Social Solidarity (Art. 2 (3) a)), o Minister of Finance (Art. 2 (3) b)), o President of the National House of Public Pensions (Art. 2 (3) c)). o On particular issues (such as financial sustainability of the pension system, pension pillar 2 and the service allowances/pensions), the Committee may invite the Presidents of Chamber of Deputies and/or of the Senate, the Ministers for Justice, Foreign Affairs, Transport and Infrastructure, the Chairperson of the Board of the Financial Supervisory Authority, the President of the Romanian Court of Accounts, President of the Fiscal Council and other representatives as appropriate (Art. 2 (4) a) - h)). In addition, the list of invitees may be supplemented by other representatives from the institutions listed in Art. 2 (4), as specified in Art. 2 (5) of the Joint Ministerial Order. Therefore, this shall also include experts from the Fiscal Council, as required by the Council Implementing Decision.  The Committee shall work closely with the technical assistance provider, mainly by contributing to the development of policy and planning directions for pension reform, providing the decision-making and debate framework for the implementation of the reform 20  of the pension system and monitoring its implementation, and providing analysis and technical inputs regarding everything related to the pension reform (Art. 3). The Joint Ministerial Order also provides additional information on the functioning of the committee. Specifically:  The Committee will be led by the Minister for Labour and Social Solidarity, who coordinates the implementation of the public pension reform of the National Recovery and Resilience Plan (Art. 2 (2).  In order to prepare the work, analyse the public policy documents and the deliverables of the technical assistance provider for discussion, analysis, endorsement and/or opinion of the Committee, a technical committee of specialists from each institution involved shall be set up (Art.1 (4)). Commission Preliminary Assessment: Satisfactorily fulfilled Number: 220 Related Measure: Improving tax and tax administration processes, including through the implementation of integrated risk management Name of the Target: Number of cash registers connected to the National Agency for Fiscal Administration IT system Target: Quantitative Indicator: Number Baseline: 0 Time: Q4 2021 150 000 Context: The objective of the investment is to improve tax and tax administration processes, including through the implementation of integrated risk management. The investment is expected to have an impact on the level of tax compliance and achievement of budget revenue, ensuring a competitive market environment and increasing the efficiency of tax collection. This specific target establishes that at least 150 000 cash registers are connected to the National Agency for Fiscal Administration’s electronic system. The full connection shall address in particular fraud in the area of trade and contribute to reducing the VAT gap. This target is the initial step in the implementation of the related investment. The next steps for the fulfilment of the investment include, among others, target 221 (Q4 2022), on additional cash registers connected to the National Agency for Fiscal Administration IT system. The overall investment underpins Component 8 – Reform 1 - Reform of the National Agency for Fiscal Administration (ANAF) through digitalisation, which shall be completed by 30 June 2026. Evidence Provided: In line with the verification mechanism set out in the Operational Arrangements, the following evidence was provided: 1. Summary document duly justifying how the target (including all the constitutive elements) was satisfactorily fulfilled, including references to the relevant provisions ( “Cover Note”). 2. An annex to the summary document, including: a) a list of unique identifiers for each cash registry, in accordance with the national legislation, demonstrating that the cash register is connected to the National Agency for Fiscal Administration’s electronic system ( “List of Cash Registers”). 3. On the basis of a sample selected by the Commission the following documentary evidence 21  was submitted for 60 selected cash registers: a) “Z-type reports” of cash registers (that is, report generated from the ANAF electronic system), showing that the cash register is connected to National Agency for Fiscal Administration’s electronic system and functioning (“Z Reports”). The authorities also provided: 4. A copy of the Official Journal, PART I, No 319/30.III.2021, which includes the Order of the National Tax Administration Agency approving the procedure for connecting electronic tax markers, as defined in Article 3 (2) of Government Emergency Order No 28/1999 on the obligation for economic operators to use electronic tax markers, to the national IT system for the surveillance and monitoring of fiscal data of the National Agency for Fiscal Administration. Analysis: The Commission finds that the evidence provided by the Romanian authorities demonstrates that at least 150 000 cash registers were connected to the National Agency for Fiscal Administration’s electronic system as of 31 December 2021. Based on the information analysed, the number of cash registers connected to the National Agency for Fiscal Administration’s electronic system on 31 December 2021 was 515 278, as certified by the list of cash registers submitted by Romania. Following the selection of a random sample of 60 cash registers, Romania submitted 60 Z reports, one for each selected cash register. Of the 60 Z reports, 45 were submitted in XML format and 15 in Excel. A Z report is defined by Romania as the daily closing fiscal report of cash registers and represents the document issued with the fiscal electronic cash register that contains synthesis data of a fiscal nature. The difference in format of files submitted is due to the fact that the latest Z report of each cash register are kept in XML format for 10 days, after which they are stored in an Excel database. The analysis of the Z reports shows that these reports correspond to the sample of cash registers selected by the Commission. Specifically:  45 Z reports in XML: each such Z report includes an “idM” number (unique message identifier). This idM number is obtained by the electronic system putting in sequence (i) the identification number of the cash register that produces the Z report; (ii) the date and time of the Z report; and (iii) the number of the Z report. The verification of the idM number by the Commission confirmed that the submitted Z reports correspond to the cash registers selected by the Commission.  15 Z reports in Excel: the verification of each such Z report submitted confirms that the submitted Z reports correspond to the cash registers which were selected by the Commission. The evidence provided for the sample of 60 units confirmed that the cash registers are connected to the National Agency for Fiscal Administration’s electronic system and are functioning. On the basis of the evidence provided, a statistical analysis has been carried out comparing the reported 515 278 cash registers and the target of 150 000 cash registers, with the 60