With international support, the Internal Revenue Service (IRS) of Ecuador is moving towards the consolidation of a risk-based management approach.

On August 2, 2023, on the occasion of the upcoming completion of the CIAT-NORAD Cooperation Program (Norwegian Cooperation), CIAT and SRI authorities met to evaluate the achievements made as a result of the technical assistance project called “Theoretical-practical Methodological Support for the implementation of a new tax compliance risk management system in Ecuador”. This project was inspired by the recommendations of the Manual on Compliance Risk Management for Tax Administrations, coordinated by CIAT with the support of the SII of Chile, the GIZ of Germany, the IMF and the IDB, and was accompanied and advised by officials and former officials of the Internal Revenue Service of Chile, becoming a model experience of cooperation among peers on a topic that is a necessity for most tax administrations in the countries of the region.

The objective of the Project was to fully develop a Tax Compliance Management Model, to ensure strategic, tactical and operational decision-making based on relevant information, and to facilitate voluntary compliance by taxpayers.

One of the first measures adopted by the IRS was the installation of a Governance Model. For this purpose, it was decided to create a Tax Compliance Management Committee, led by the General Directorate of the SRI. In the next phase, a Tax Compliance Management Model was designed, divided into 5 stages, following international best practices, and the hierarchical structure of the team in charge of tax risk management and analysis methodologies was strengthened.

Subsequently, different instruments were conceptualized to support the development of tax risk management activities, including the global risk rating model, the specific risk map, the risk file and catalog, and the tax compliance management plan.

As a result of the actions implemented within the framework of this CIAT-NORAD-SII project, the SRI has improved the coverage index of prioritized risks and the performance of control processes, which has had an impact on a gradual increase in collection in the first half of 2023 in relation to the first half of 2022, even though last year there was a record collection for the tax administration.

The project allows obtaining good results on the developed areas, in the TADAT evaluation carried out in 2022, obtaining an “A” grade for the indicator related to the collection of information, investigation and identification of compliance risks related to the main tax obligations; and “B” for the indicator related to the process used to evaluate, classify and quantify the taxpayers’ compliance risks.

It is important to highlight that during this year 2023, the SRI has started a technological renovation project supported by IDB, which contemplates the comprehensive improvement of information governance, its processing, modeling and visualization, among other factors. To meet this SRI digital transformation challenge, the CIAT-NORAD-SII Project has been key, as it has allowed to lay the foundations to install a new institutional culture based on a risk approach and define the necessary cross-cutting processes on which the digitalization efforts will be based. In this sense, the IDB-INTAX project is one of the tangible effects of the results obtained thanks to the CIAT-NORAD-SII project.

The SRI has the roadmap to continue taking the necessary steps towards the full implementation of a comprehensive tax compliance model with a risk-based management approach, being, together with the SII of Chile, one of the few tax administrations in the region that have ventured into this management approach.

 

From left to right: Mr. Francisco Briones, General Director of SRI; Mr. Juan Carlos Proaño, Deputy Director for Organizational Development of SRI; Mr. Gonzalo, CIAT Director of International Cooperation and Taxation; Mrs. Mónica Alonso, CIAT Manager of International Cooperation.

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