HARMONIZATION OF INDIRECT TAXES  

Andean Community harmonization of indirect taxes seeks to both perfect national tax systems by adopting the best international practices and avoid trade distortions stemming from differences in those systems due to the action of national legislative bodies (that can approve or reject them, just as they do when they ratify an international treaty).  Each detail of these legal provisions was discussed and prepared by a group of government experts from the five countries. Two Decisions --binding Community legislation-- were approved on the matter at the Presidential Summit in Quito, Ecuador on July 12, 2004. One has to do with value-added type taxes –VAT-- and the other concerns excise taxes. 

DOUBLE TAXATION   

When two or more countries consider that they have the right to tax given income, the result is double or multiple taxation.   In those cases, the same earnings may be taxed by more than one State.   

When they have to face up to and resolve cases of double international taxation, States sign agreements or accords to regulate the situation.  Those agreements stipulate not only the rules to be used to avoid double taxation, but also the mechanisms needed so that Tax Administrations can collaborate in detecting cases of tax evasion.   

The CAN adopted pertinent measures in this regard through Decision 40 (November 16, 1971).  The system was specified in May 2004 through Decision 578, which entered into effect on January 1, 2005.

FISCAL EQUITY 

How Andean Community Member Countries direct their priorities for State action can be determined by studying each country’s public income and spending situation and the social impact of its fiscal policy.