Executive raises the fence to access tax exemptions

The government of President Pedro Castillo published the Legislative Decree No. 1521, which modifies Rule VII of the Preliminary Title of the Tax Code in consideration of the recommendations of international organizations. In this regard, the Ministry of Economy and Finance (MEF) explained that this provision updates and makes “stricter the rules to which they must be subject for their evaluation and approval.”

In this way, it is established that no exemptions, incentives or tax benefits should be granted on selective consumption taxes or on goods or services that harm health and/or the environment.

In this sense, the explanatory memorandum of the legal regulations to grant exemptions, incentives and tax benefits must incorporate the support that demonstrates that the adopted measure is more effective and efficient “with respect to other public spending policy options considering the proposed objectives” , as well as evaluating that unequal conditions of competition are not generated with respect to non-beneficiated taxpayers.

In the articles of the legislative proposal, the indicators, factors and/or aspects that will be used to evaluate the impact of the exemption, incentive or tax benefit must be indicated.

MEF: well-supported exemptions

In the event that the proposal for an exemption, incentive and tax benefit is from the Executive Branch, it must have a favorable report from the MEF.

“Only those subjects who issue electronic payment receipts for the provision of the economic activities they carry out may be beneficiaries of any tax exemption, incentive or benefit., as long as they are required, in accordance with the regulations issued by the National Superintendence of Customs and Tax Administration (Sunat) “, refers to the resolution.

In order to make tax spending transparent in a similar way to public spending, the Tax Administration is obliged to publish in its digital headquarters, any rule that grants preferential tax treatment, information on the benefited taxpayers and the amount of the benefit.

In the event that said amount is within the scope of the tax reserve, it must be published according to the concentration of the use of the benefit, type of taxpayer, economic activity, income range of the beneficiaries or other pertinent grouping.

“The Tax Administration is granted a period of up to two years to publish the information related to the tax exemptions, incentives or benefits that would have entered into force before January 1, 2020,” the document concludes.

MEF: reduce exemptions

Although tax exemptions, incentives and benefits are instruments of a country’s economic policy aimed at promoting economic or social policy objectives, the use of these instruments implies less tax collection, reducing the scarce resources available to the country to invest. in the population, and should be used in the cases that are really required.

The tributary David Bravo, partner at Estudio Lazo, De Romaña & Bravo Abogados, highlighted for La República that this rule allows delimiting the legislative power in terms of granting tax benefits such as exemptions, in order to prioritize objective and quantifiable criteria to grant a benefit and “not subordinate to political factors or interests.”

“It seems to me a good norm that will force the one who presents the initiative to support it properly and explain why the benefit and the universe of subjects that will enjoy it, also demanding the pronouncement of the MEF as rector of the country’s fiscal policy,” said the specialist.