1. The Relationship between Corporate Income Tax Reporting and Financial Reporting: A Pan-European Perspective in the Context of Adoption of IFRS
Frédéric Gielen
Lead Financial Management Specialist
Europe and Central Asia Region
THE WORLD BANK

2. The objectives of our research
The objective of our research
The objectives of our research
Investigate the relationship between Financial and Tax Reporting
Investigate the possible Effects of the Utilization of IFRS on that relationship

3. The scope of our research Luxembourg; Poland; The Netherlands; The UK
 Belgium; Denmark; Estonia; France; Germany;
Luxembourg; Poland; The Netherlands; The UK

4. Our initial findings……
The scope of our research
Our initial findings……

5. Preliminary Situation Analysis - Belgium Belgium
Basis of Assessment
Annual accounts
prepared in compliance with Belgian accounting
standards
Consequences of IFRS on tax
Alignment/Dependency of tax and annual accounts
Limited by not currently permitting the presentation of annual accounts in compliance with IFRS
Belgium
Tax rules follow accounting
principles in Belgium
Currently Belgian
accounting
standards are
not harmonized
with IFRS
IFRS forum
established to work
on framework
to enable Belgian
GAAP to converge
Permit annual accounts under Reg. 1606
Allowing for certain adjustments between the “financial” and “taxable” profit
None

6. Preliminary Situation Analysis - Denmark Denmark
Basis of Assessment
Tax books prepared according
to Danish tax rules
Consequences of IFRS on TAX
Alignment/Dependency of tax and annual accounts
Limited as tax reporting is independent from financial reporting
Denmark
Annual accounts
are independent of
tax rules in Denmark
Permit annual accounts under Reg. 1606
All

7. Preliminary Situation Analysis - Estonia Estonia
Basis of Assessment
Distributions to shareholders
Consequences of IFRS on TAX
Alignment/Dependency of tax and annual accounts
Limited as tax computation is assessed based on the distributions to shareholders
Estonia
Unique framework as tax
base is from distributions
not profits
Permit annual accounts under Reg. 1606
All

8. Preliminary Situation Analysis – France
Basis of Assessment
Annual accounts
prepared in compliance with French accounting
standards
Consequences of IFRS on TAX
Alignment/Dependency of tax and annual accounts
Reg has no direct impact as not allowable for tax reporting but as French GAAP is converging with IFRS there is an impact but it is measured and controllable
France
Tax rules follow accounting
principles in France
French Accounting Board to modernize French GAAP by implementing some IAS/IFRS standards over a time period
Permit annual accounts under Reg. 1606
French accounting rules are converging with IFRS, thus impacting tax bills
None

9. Preliminary Situation Analysis - Germany Germany
Basis of Assessment
Annual accounts
prepared in compliance with German accounting
standards
Accounting principles follow
tax rules in Germany
Alignment/Dependency of tax and annual accounts
Consequences of IFRS on TAX
Limited by allowing IFRS for informational purposes only
Germany
Currently German
accounting
standards are
not harmonized
with IFRS
Permit annual accounts under Reg. 1606
Expert group discussing moving away from the dependency on annual accounts for tax reporting
All

10. Preliminary Situation Analysis - Luxembourg
Expert group discussing the possibilities of
IFRS statements for tax purposes without a reconciliation
Basis of Assessment
Annual
prepared in compliance with Luxembourg accounting standards
Accounting principles follow
tax rules in Luxembourg
Alignment/Dependency of tax and annual accounts
Consequences of IFRS on TAX
Limited by requiring a reconciliation back to tax reporting requirements
Luxembourg
If option is used
required to
reconcile to local
tax GAAP if using
IFRS for Individual
entity accounts
Permit annual accounts under Reg. 1606
Tax profit is similar to accounting profit allowing for certain adjustments between the “financial” and “taxable” profit
Listed companies
Unlisted banks

11. Preliminary Situation Analysis - Poland
Basis of Assessment
Tax books prepared according
to Polish tax rules
Consequences of IFRS on TAX
Alignment/Dependency of tax and annual accounts
Poland
Limited as tax reporting is independent from financial reporting
Annual accounts
are independent of
tax rules in Poland
Currently Polish
accounting
standards are
not harmonized
with IFRS
Permit annual accounts under Reg. 1606
A reconciliation between taxable profit and financial profit is a mandatory note to the annual accounts
Listed companies

12. Preliminary Situation Analysis - Netherlands
Permit annual accounts under Reg. 1606
All
Consequences of IFRS on TAX
Alignment/Dependency of tax and annual accounts
Basis of Assessment
Limited as tax reporting is independent from financial reporting
Tax books prepared according
to Dutch tax rules
Annual accounts
are independent of
tax rules in the Netherlands
Netherlands

13. Mr. Wayne Weaver, Tax Partner Banking & Capital Markets
Preliminary Situation Analysis – United Kingdom
United Kingdom
Mr. Wayne Weaver, Tax Partner
Banking & Capital Markets
Deloitte & Touche LLP

14. reporting requirements
Preliminary Analysis – Important Considerations
Emerging High Level Policy Considerations
Compatibility of
IFRS
with corporate tax
reporting requirements
Convergence of
taxation
policies/models
in the EU
Consolidated tax
base in the
European Union
Maintaining
dependencies
between tax
and financial
reporting
“The art of taxation consists in so plucking the goose as to obtain the largest amount of feathers with the smallest amount of hissing”
Jean-Baptiste Cobert, Minister of Finance under Louis XIV

15. Research Paper will be available for review in May/June 2006
Final Paper
Research Paper will be available for review in May/June 2006
We look forward to presenting our final findings at that time
Thank you