APPLYING IFRS NO. 15 TO SERVICE CONCESSION ARRANGEMENTS IN BRAZIL: “MARK-UP GAME” FOR TAX BENEFITS?

Abstract

This paper aims to investigate a possible tax consequence of applying IFRS no. 15 to service concession arrangements in Brazil. A phenomenon observed in a specific set of operators of service concession arrangements from a particular sector was the difference among their construction and operation mark-ups, as disclosed in Annexes 1 and 2 of this paper. Taking into consideration the tax rules in force which allow to postpone the profit taxation from construction activity and also allow for tax purposes a choice of a mark-up according to different activities (presumption of profit), the hypothesis of tax planning was raised as a reasonable explanation of the phenomenon. The qualitative and quantitative evidences gathered from the companies sampled, in the chosen period (2017 and 2018), were not conclusive. They generated outputs not consistent. If on the one hand outputs may explain mark-ups from some companies, on the other hand they do not explain the statistical mode observed: C&U mark-up zero and O&M mark-up positive. A bigger sample than the used one, with a variety of service concession companies, in a wider sample period (2017, 2018 and 2019), may generate more robust outputs and assure better inferences regarding the set of companies studied.