Tax pressure would fall to historic lows of 15%

The Ministry of Economy and Finance (MEF) has estimated that Peru’s tax pressure (ratio between tax revenue and GDP) will fall from 16.8% in 2022 to less than 15% in 2023, due not only to the recession in course, but to multiple bills promoted from the Congresswhich have eclipsed the country’s fiscal accounts.

Miryam Yepes, director of Economic Intelligence and Tax Optimization of the MEF, warned that, although there is a lack of progressive income In most economies in the world, including the EU, in Peru it is “particularly serious.”

During the presentation of the report ‘Systematization of tax reform proposals in Peru, Chile and Colombia (2021-2023)’, organized by the Tax Justice Group (GJF), the official considered that this disparity has been supported, in part , for the sabotage of various reform attempts promoted in recent years, such as in particular opportunities regarding mining.

“We have low tax pressure and high tax expenditure. Probably, as a percentage of GDP, it is not much (2%), but considering that our pressure in 2022 was 16.8%, it is a tax expenditure very high relative,” he revealed.

At this point, Yepes recalled that, in 2021, the IMF concluded that Peru had a medium-level tax burden on mining (36%) and that “there was fiscal space to increase it without losing competitiveness,” compared to other countries in the region. , like Chile. Currently, that distance has lengthened to 8 or 9 points.

Given the refusal of the congresses since then, the MEF has chosen to work today on a program of the OECD which will allow the system to be reorganized and raise “billions of additional soles” from the fight against evasion-avoidance.

“When this tax reform was promoted in 2021, It was expected to raise around S/12,000 million. So far in 2023, Congress has enacted bills that have a fiscal cost that will reduce collection between S/8,657 and S/11,392 million. That is to say, what was expected to be raised with the reform, they have already exhausted it this year and next year it looks quite bleak,” he signed.

Peru in the fiscal queue.

The report, prepared by Josselin Yauri and César Flores, shows how in Chile and Colombia, also extractive economies, the reform has been progressive for decades. Along these lines, while the majority of countries in the region have advanced towards an average of 23%, Peru remains around the 16% pressure left by the Government of former President Belaunde.

In turn, the current director of the BCRP, Roxana Barrantes, asserted that there are other fiscal spaces that should be subject to review. This is the case of the VAT, in which it has not been possible to promote effective policies that reduce evasion.

“What should draw our attention is the amount of evasion we have in the VAT. In Peru, if the rate is 18%, it would have to be collecting 9% as a proportion of GDP. But we are at 6%, we have a 3-point difference,” he warned.

A reality that the former Minister of Economy Pedro Francke associated with the lack of resources to reduce gaps and that will put the Government and population to the test in the midst of a disproportionate issuance of supplementary creditstied to a gaseous tax cap of 2.4%.

“In a recession it is normal for the pressure to drop, but it seems that this year it has fallen more than expected. “From 17% to 15% is strong and has to do with a series of tax perforations and disincentives approved by Congress and the Constitutional Court—appointed by it—which issued a ruling to forgive debts,” he said.

MEF: laws that undermine collection

Among the laws promoted by Congress that the MEF questions is Law 31940, which postpones the declaration and payment of IR 2023 until June 2024. Also Law 31903, which gives mypes free disposal of their deduction funds, but will reward to “bad taxpayers who issue false invoices.”

Also There are regulations still under debate that generate concern for the MEFsuch as PL 5892 of the new industries law, and the “positive sanction” of PL 5892.

The latter obliges Sunat to carry out training, address by address, failure by failure, in the event that the mype has committed fraud.

Reactions

Roxana Barrantes, director of the BCRP

“Other countries have a lower threshold for starting to pay IR and that is something we should also examine. But, without a parliamentary majority, it is very difficult to carry out a reform.”

Miryam Yepes, Directorate of Economic Intelligence and Tax Optimization of the MEF

“It’s a time when, instead of talking about how we could change policies to increase income, we should talk about how we defend the income we have.”

Pedro Francke, former Minister of Economy

“According to the IMF itself, the cash cost of mining in Peru is relatively low compared to other countries. That is, if companies have fewer costs, they have more profit and, therefore, more margin.”