OECD: tax collection as a percentage of Peru’s GDP is lower than the rest of Latam

An evaluation of the Organization for Economic Cooperation and Development (OECD) shows that tax collection as a percentage of Peru’s GDP in 2019 (16.6%) was 6.3 points below the average of the rest of the countries of Latin America and the Caribbean (22.9%).

In this prepandemic period, before the health emergency began, Peru’s tax pressure was also well below that registered in the countries that make up this international cooperation organization (33.8%), made up of 38 states.

Similarly, the OECD verified that tax collection as a percentage of Peru’s GDP increased by 0.2 percentage points from 16.5% in 2018 to 16.6% in 2019. In comparison, the average collection in Latin America and the Caribbean increased by 0.3 percentage points between 2018 and 2019.

Over a longer period, the region’s average increased by 4.7 percentage points, from 18.2% in 2000 to 22.9% in 2019; while, in the same period, Peru’s tax to GDP ratio increased by 1.4 percentage points, from 15.2% to 16.6%. In addition, since 2000, the highest tax ratio over GDP in Peru was 19.2%, in 2014; and the lowest was 14.9%, in 2002.

The period of deceleration in Peru coincides with the management of the former Minister of Economy and Finance, Alonso Segura, who in 2014 announced a reduction of the fourth and fifth category Income Tax (IR) for individuals with lower incomes.

During the government of former President Ollanta Humala, Segura also promoted a reduction in corporate income from 30% to 28%; as well as a plan to reduce the selective consumption tax (ISC) on gasoline and diesel fuel of 98, 97, 95, 90 and 84 octane and residuals. He also proposed reducing the percentage of workers required for dismissal for economic reasons from 15% to 10%.

“What we collect is very low compared to the rest of the Latin American countries. The 2014-2017 period is striking, where our collection (as% of GDP) fell. This is not sustainable ”, demanded Hugo Ñopo, Grade researcher, through his social networks.

Comparative Tax Structure of Peru

Most of Peru’s tax revenue in 2019 came from the value added tax on goods and services taxes (38.5%), while the second largest share of tax revenue in 2019 came from income tax of companies (23%).

At this point, it can be seen that, while income tax on individuals represents 24% of the collection in OECD countries, in Peru it only reaches 12%. Furthermore, while in the countries of the organization 26% of the tax structure is derived from social security contributions, in Peru it only reaches 12%.

At the other extreme are taxes on value added and on goods and services, which in the average of OECD countries represent no more than 20% of their tax structure, while in Peru it reaches 38%.