Paraguay – New initiative to strengthen tax audits

May 14, 2024

Towards a more efficient tax audit profession

On April 16, Paraguay launched a new initiative supported by the Organization for Economic Cooperation and Development (OECD) and the United Nations Development Program (UNDP). This initiative, carried out through the Inspectores Fiscales sin Fronteras (IFSF) program, aims for Chile’s Internal Revenue Service (SII), which has followed OECD guidelines for more than a decade, to provide technical assistance to the National Directorate of Tax Revenue (DNIT) to improve its tax inspection skills and techniques through joint collaboration between tax audit experts and officials from both tax administrations. The main purpose of this program, within the Paraguayan context, is to increase tax collection and enable improvements, both organizational and legislative, with respect to international tax cooperation and Transfer Pricing.  

The IFSF Program and Transfer Pricing

It is worth mentioning that, the IFSF program started in 2015. According to the Annual Report of Tax Inspectors without Borders 2024, the global influence of IFSF is not only limited to increasing tax revenues at the international level, since, when implemented within developing countries, it ensures that bilateral agreements do not generate spaces conducive to tax evasion and avoidance practices. Regarding Transfer Pricing, it is mentioned that the program allows confronting Base Erosion and Profit Shifting (BEPS). In addition, it emphasizes the need to strengthen auditing skills with a deeper knowledge of various sectors, in order to conduct effective audits of Multinational Companies.   

The implementation and application of the IFSF program 

DNIT has an optimistic view of the implementation of the IFSF program within its territory, as it observes the potential between working in parallel with Chile, thus this collaboration will allow achieving greater efficiency and effectiveness in tax inspections. It should also be noted that the program represents a tool to face the challenges that arise within globalization, transcending borders and coordinating actions between countries for the benefit of the population.  

The application of IFSF has reported positive results in different countries in the Latin American region, as was the case of Ecuador, which received technical support in tax matters from the tax administration of the United Kingdom. Likewise, at the end of 2023, a pilot project on Country by Country Report (Cbc) was launched in Peru with technical assistance from the tax administrations of the UK and Mexico, for the effective use of the information provided in the CbC return.   

Conclusion 

In conclusion, we believe that taxpayers should be increasingly prepared to comply with their tax obligations, in a timely manner and with adequate support on the information reported, as the collaboration between the tax administrations of the countries in the region will allow a more thorough and effective review to protect their tax collection and detect elusive practices.