Tax Justice
Issues
The work on strengthening and harmonising accounting standards is critical to the work on promoting tax justice, and therefore central to the interests of LICs in their efforts to raise budget revenue and reduce their dependency on external sources.
G20 re-emphasised the importance of achieving a single set of improved high quality global accounting standards and called on IASB and Financial Accounting Standards Board (FASB) to complete their convergence project by the end of 2011. IASB and FASB have indicated that they will not issue new standards unless satisfied of the quality, which suggests they are finding their timeframe to be tight. There are differences between the IASB and European approaches.
IASB is responsible for developing a set of high quality, understandable, enforceable and globally accepted international financial reporting standards (IFRS) based up on clearly articulated accounting principles. But it has no authority to impose standards. There are presently 38 standards and 28 “interpretations”. IASB has issued IFRS for SMEs and non-listed entities, which would apply to LICs where most businesses are unlisted and SME or smaller.
The World Bank leads on assessment using the Reports on the Observance of Standards and Codes (ROSC). It assists member countries to compare national with international standards, assess the strengths and weaknesses of supporting institutional frameworks, and develop action plans for improving institutional capacity.
It is interesting to note the words “tax” or “justice” do not feature much in the literature. More on this may be found in the OECD / Global Forum work.
There is a problem about definitions with respect to what is a tax haven or secrecy jurisdiction: they focus on tax information exchange, but exclude very relevant issues such as company legislation and financial sector transparency.
There is duplication between the FSB peer reviews on tax issues and other reviews launched by the FSB. Some choices for best practice leaders are also questionable: the City of London for example is not a good example of financial transparency.
Progress and next steps (as of April 2011)
- IASB and FASB expect to complete board deliberations on: impairment of financial assets, balance sheet netting of derivatives and other financial instruments, leasing, and revenue recognition by June 2011 (but unlikely they will finalise the key standards)
- Final standards would be published during S2 2011, with each board set a mandatory effective date at the time the standard is finalised to allow time to prepare
- US SEC aims to determine by end-2011 whether to incorporate International Financial Reporting Standards into the financial reporting system for US issuers (it presently applies to foreign private issuers)
Key contacts
FSB at the request of G20 delegates tax-related issues to agencies such as the OECD Global Forum, IASB and FASB, and does not appear to be directly involved in them beyond monitoring progress.
- IASB is dominated by the private sector. However, it would need to be contacted with respect to design of the IFRS standards and interpretations, and the World Bank on their implementation
- OECD via the Global Forum would need to be contacted on transparency and exchange of information issues
References