OECD demands a tax reform from Peru in 3 years

The Peruvian Government will have to reduce market informality, through strategies such as the rationalization of intermediate tax regimes and greater use of information technologies in the fight against tax evasion, if it intends to meet its goal of joining the OECD in 2026.

Before the Special Commission for Monitoring the Incorporation of Peru into the OECD of Congress, the Minister of Economy and Finance, Alex Contrerasrecognized that Peru’s macroeconomic strength (at a fiscal and monetary level) is offset by low collection, associated with high rates of informality, which even exceed the averages for the region.

This, in connection with the publication this month of the Report of recommendations for Peru’s accession to the OECD, which Minister Contreras still hopes to save in about three years.

“In Peru, half is collected than in an OECD country and less than the Latam average. Behind that is high informality, something we have to fight against, because generates a series of deficiencies in infrastructure and transportation quality. The document is clear,” she said.

In fact, in Peru only the employment informal advances at a firm pace. In 2022, it will reach 13.4 million workers, 75.7% of global employment. Meanwhile, net collection totaled S/100 million 335,000 between January and August 2023, 13.8% less than in the same period of 2022.

The former vice minister of the MTPE, Fernando Cuadros, recalls that greater formality implies that more workers declare their true income, in addition to the independents as a whole helping to increase the tax base.

“We would also have to think about progressive reforms that allow greater collection of those who earn the most,” says Cuadros.

On the contrary, Luis Arias, former head of Sunat, maintains that Peru is already at a disadvantage in terms of collection since the TC decided to forgive million-dollar debts to companies that prosecute their cases, in addition to delaying the promised reduction of mype regimes.

“However, The latter will not solve the problem either.. In no country in the world are the regimes for small children the ones that allow for improved collection,” Arias graphs.

Raise money with more formal employment in Peru

OECD clarifies that the recommendations are not binding, but must be implemented based on what the local government determines. Reducing regimes is only the tip of the story, and improving collection could add 2.3 points to GDP.

It also warns that, in order to preserve the country’s fiscal sustainability, the increase in social spending it should only be done “gradually once permanent income is available.”

Currently, 90% of jobs in agriculture are informal, while in fishing 87.8% of existing jobs work outside the formality.

The word

Alex Contreras, Minister of Economy

“There are many administrative restrictions that affect the creation of companies in our country; that is something very relevant. “Peru is one of the countries with the highest administrative burden in the region.”