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

2. 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 The objective of our research

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

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

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

6. 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 Denmark Tax books prepared according to Danish tax rules Annual accounts are independent of tax rules in Denmark Preliminary Situation Analysis - Denmark

7. 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 computation is assessed based on the distributions to shareholders Distributions to shareholders Unique framework as tax base is from distributions not profits Estonia Preliminary Situation Analysis - Estonia

8. Preliminary Situation Analysis – France France Permit annual accounts under Reg. 1606 None Consequences of IFRS on TAX Alignment/Dependency of tax and annual accounts Basis of Assessment French Accounting Board to modernize French GAAP by implementing some IAS/IFRS standards over a time period Annual accounts prepared in compliance with French accounting standards Tax rules follow accounting principles in France Reg. 1606 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 French accounting rules are converging with IFRS, thus impacting tax bills

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

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

11. Preliminary Situation Analysis - Poland Permit annual accounts under Reg. 1606 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 Polish tax rules Annual accounts are independent of tax rules in Poland Poland Listed companies A reconciliation between taxable profit and financial profit is a mandatory note to the annual accounts Currently Polish accounting standards are not harmonized with IFRS

12. 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 Preliminary Situation Analysis - Netherlands

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

14. Preliminary Analysis – Important Considerations Compatibility of IFRS with corporate tax reporting requirements Consolidated tax base in the European Union Convergence of taxation policies/models in the EU Maintaining dependencies between tax and financial reporting Emerging High Level Policy Considerations “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 We look forward to presenting our final findings at that time Thank you Final Paper