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Basic products exempt from VAT are defined today

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As planned, the Executive Power yesterday observed the signing of the law that exempts from the general sales tax (IGV) the products of the basic family basket, but that also affected foods that are not considered popular consumption such as thin loin, goose and pheasant.

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Also, to prevent more errors from occurring in the preparation of a new replacement text, the Ministry of Economy and Finance (MEF) submitted to Parliament a new, more specific proposal that would have a lower fiscal impact. Since the measure would only be given for three months (from May to July 2022). Parliament had opted for a validity of 8 months.

In this way, the Executive proposes that five basic products be exempted from VAT: chicken meat, sugar, eggs, noodles and bread; being the main foods that are part of the basic family basket.

In addition, taxpayers who market these goods may apply as a tax credit the IGV corresponding to the acquisitions or imports of the main inputs required in the production process of the exempted goods, which would be determined by the MEF.

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The absence in the list of the MEF was the oil. Sources close to the Executive indicated that it was not considered because an increase was not observed in recent months. With the new proposal, the State would stop receiving around S/ 150 million per month; that is, about S/ 450 million until July of this year.

They agree to the proposal

The Executive’s initiative will be reviewed today by the Economy Commission in an extraordinary session.

However, Silvia Monteza, president of said working group, told The Republic that they are acquiescing to what was proposed by the MEF and will transfer their proposal for a substitute text as an opinion to be debated in plenary.

“We will take your text [del MEF] as it is, because they are the specialists and they know the matter. It will be the same as the Executive to avoid problems,” Monteza told this medium.

In this way, today the search ruling is scheduled in the observations of the Executive. If approved, it will go to the plenary session today, since the Board of Spokespersons agreed to give it priority.

A more limited list

Jorge Guillén, professor of Finance at ESAN Graduate School of Business, stated that the Executive’s new proposal is more limited and focused on basic products.

However, he considers that a better measure would have been the delivery of a subsidy to the most vulnerable families.

An uncertain impact on the consumer

Although the Executive’s proposal seeks to reduce the prices of basic products, its impact would not be guaranteed.

“An exemption from the IGV does not guarantee that the tax is transferred in its entirety to a lower price for consumers, since producers and marketers could increase their profit margins,” said the Executive.

This is also endorsed by Jorge Guillén, who mentions that it is very likely that this differential will not be transferred to the final consumer.

Indecopi was proposed to monitor the price reduction.

Source: Larepublica

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