International Financial Reporting Standards (IFRS) and their impact on assessing taxes

I would like to introduce a working paper recently prepared by the CIAT on the “implementation of the IFRS and their impact in the field of tax administration”: http://biblioteca.ciat.org/opac/

This working paper is the result of a survey answered by 10 countries in Latin America (Argentina, Bolivia, Brazil, Costa Rica, Ecuador, El Salvador, Guatemala, Dominican Republic and Uruguay), which presents unpublished information on the status of the implementation of the IFRS in these countries and the actions carried out by the tax administrations, through three sections:

1. Status of the convergence process

2. Impact on the correlation with the corporate income tax

3. Impact on the tax administration.

The IFRS are accounting standards developed and adopted by the International Accounting Standards Board, known by its acronym IASB. This institution, with headquarters in London is an independent body of the private sector which works under the supervision of the International Accounting Standards Committee Foundation and operates since 2001.

These rules arise as a result of the need to generate information to satisfy different users; define the objectives of financial statements, the assumptions on which the same are based, their qualitative aspects, concepts of capital, among others. Although already known, the IAS have not lost their validity, the IFRS complement them on specific aspects and rescued the best practices in this field, allowing homogenize accounting standards worldwide and thus facilitate comparisons between financial statements submitted in different countries, as well as the possible reduction of compliance costs to companies that operate globally and provide companies with opportunities to improve their corporate governance

Currently the IFRS are widespread and are used globally in several States, i.e., the countries that from the European Union, Australia, Malaysia, India, South Africa, Guatemala, Turkey, Russia, among many others.

In this context, it is relevant that the tax administration follow-up the implementation process and regulations of IFRS in the country, analyze the effects possibly generated by the IFRS on tax aspects, especially in those cases where the tax rules concern accounting standards; provide ongoing training to officials of the tax administrations and coordinate actions with related organizations (groups of professionals, regulators, academia, etc.); assess the potential impacts on aspects relating to the control of big companies and international taxation and transaction both the tax administration and taxpayer costs and consequently simplify processes for different segments of taxpayers reached by IFRS.

Whereas the implementation of IFRS could present effects on tax matters, it is essential that the tax administrations of member countries which have implemented IFRS generate studies aimed at assessing the impact of these rules on fiscal policy and the tax administration.

As a result of this concern, the Internal Revenue Service of Ecuador and CIAT assigned efforts in 2011 to incorporate this issue into the international tax agenda. A workshop was organized in Quito, which purpose was that various tax experts of the sector, the tax administrations of CIAT member countries exchange ideas and experiences on aspects relating to the implementation, adaptation and application of standards and processes that comply with standards provided by IFRS, without affecting the normal performance of the business or generate excessive compliance or tax administration costs. The following link reviews the materials of the abovementioned event: https://www.ciat.org/event/seminario-aplicacion-de-las-normas-internacionales-de-informacion-financiera-niif-y-su-impacto-en-el-ambito-de-la-administracion-tributaria/?lang=en

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