Pedro Francke: “We hope to get Congress to approve the proposed tax reform as a whole”

After being approved in the Congress of the republic The 2022 public budget after a work with the Executive, the Minister of Economy and Finance, Pedro Francke, hopes that Parliament will grant him this year the powers to legislate on tax matters and thus the collection will increase up to S / 12,000 million a year. If they are not approved before the end of the year, measures could not be applied from 2022.

The International Monetary Fund (IMF) indicates in its report that there is room to increase rates in the mining tax regime, how much could they be raised?

Indeed, we have this preliminary report from the IMF that has made the mission. The thing about fees is that it depends on a combination of several elements. There is the royalty, the minimum rate, the Special Mining Tax, and there are dividends. In other words, there is a combination of these different taxes that has to be measured, calibrated to have a result that is within the margin that the IMF has indicated that we have so as not to affect the competitiveness of the mining sector, achieving higher collection in Peru. The context in which this measure occurs is one in which metal prices have risen substantially. There is a margin, let’s say, of the mining companies that is significant and that, in addition, the main projections indicate that it will be maintained during the medium to long term, and there the importance of the possibility of being able to carry out this tax reform in the case of the mining regime, which is one of several components that we are raising in the delegation of powers that we have asked Congress.

How much could be collected with these changes to the mining tax regime?

We are still in the part of being able to accurately estimate the rates and make the corresponding calibrations. Still, what the IMF report has shown us is that we have a margin, but based on a more precise definition and what the changes would be, we will be able to have more precise estimates of collection.

But have you already done a calculation?

Our calculation is global of the set of tax reform, We have estimated that we can achieve around S / 8,000 million or S / 12,000 million annually, that is our global calculation for the different concepts that is still a rough estimate. To make an accurate calculation we need an accurate estimate of the rates and we do not yet have one. We are in that process this coming week to have a final proposal. We’ll probably have that in about 15 days.

Has the IMF evaluated your proposed tax reform?

No, the IMF in its mission has only evaluated some issues, because the delegation of powers of the tax reform has about 40 different elements. Some refer to evasion, avoidance, debt collection, more procedural issues. And the IMF, which has been advising us, like the World Bank, are supporting us on some specific issues. The IMF mission has had three particular advisory topics: the mining tax regime; taxes on capital gains, dividends and capital income, and thirdly, the taxation of the digital economy, these new digital services. Those are the three topics in which the mission of the International Monetary Fund has done an analysis to help us make the best decisions.

And has the IMF endorsed those three points specifically?

Indeed, in several of these cases there is a more detailed analysis in the sense of what the margins are, how we compare it with other countries and what are the proposals.

When could the rates for the mining regime be defined?

Our objective in the mining tax regime is to obtain the delegation of powers that we hope has to take place before the end of the legislature, let’s say in approximately two weeks, perhaps a little longer, our objective is to be able to issue the corresponding legislative decree before the end of the year so that changes can be applied in the 2022 period, such as the Special Mining Tax or capital income that must go with the Income Tax. So if it is not approved before the end of the year, 2022 can no longer be applied, but it would only be applied from 2023. Definitely our objective in these matters is to do it before the end of the year.

Along these lines, have you managed to talk with the commissions in charge?

We have now had a conversation with the president of the Constitution Commission and we have previously had dialogues with the president of the Economic Commission, but I believe that the deadlines of the commissions and the Legislative Power are something that the congressmen presiding over the commissions themselves must respond because it falls within the scope of their autonomy.

If not approved this year, how much would be stopped collecting in 2022?

Our estimate is that the annual collection could rise between S / 8,000 and S / 12,000 million. If we did not get any measures, that would be more or less what we would lose. It is our estimate of the additional resources that we would like to obtain.

How much could the tax pressure rise?

Our overall tax reform proposal aims to improve the tax burden between 1% and 1.5% of GDP, It should be remembered that the pressure in Peru is 5 points below the Latin American average. (…) This is a first step, an important effort but one that would not close the gap in relation to the average tax collection in Latin America.

You said that if there was not enough time to apply this tax reform, they would present a bill for each proposal. What would be the points that you would prioritize?

We are with the intention, with the effort, to get Congress to approve the whole of the proposed tax reform. All the measures we have proposed are fully justified. We insist that this delegation of powers is something that has been granted several times in the past, all previous governments have had the possibility of having this delegation of powers in economic and tax matters, which we think is the best for the country. The issue that Peru has such a low tax pressure is something recognized by all experts in the field at the national and international level.