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Those who earn over S / 300,000 a year, would pay more income tax

The tax reform that the Executive will implement – as long as Congress grants it the powers to legislate in this matter – will seek to increase collection by S / 12,000 million annually, which would represent an increase of 1.5% of GDP, as projected by the Minister of Economy and Finance (MEF), Pedro Francke.

Among the proposals that the Executive will seek to promote is the increase in Income Tax (IR) rates for those taxpayers who receive high incomes.

As Francke explained, it is proposed to raise the IR only to taxpayers with incomes greater than S / 300,000 a year.

“The IR is a tax that is paid on natural persons progressively; that is, for the first S / 300,000 the current rates would not be modified, for the excess of that amount they would pay an additional rate. In Latin America the highest rates are between 31% and 35%, in Peru it is 29%, there is room to tax a little more “, he stressed.

If the measure is implemented, it would impact less than 0.5% of taxpayers and would not affect the low and middle income sectors. Francke clarified that those who earn less than that amount will not have their taxes raised.

Another measure aims to reduce the maximum limit of the deduction over 20% of the declared income. And is that, currently workers who earn up to S / 528,000 a year can deduct up to S / 105,600. Given this, the MEF considers that the cap is excessive and will propose that the income limit of taxpayers who can deduct be reduced to S / 300,000 per year.

Another change to consider is that in the first and second category IR regime (rental and sale of real estate, interest, royalties, among others) the rate of capital income is raised to no more than 10% (today at 5% ), this due to the fact that it is lower than the rate of workers’ income (between 8% and 30%).

In addition, the payment of the additional 2% on the IR rate will be extended for all large companies that access legal stability agreements. Currently, this measure only applies to mining companies.

In this regard, the tax lawyer Jorge Manini commented that most of the proposals focus on raising rates, but not on expanding the tax base. He specified that the Executive is against time if it wishes to approve the changes to the IR, since it only has until December 31 so that they can take effect as of fiscal year 2022.

Given this, Francke said that to get the faculties the priority will be that the regulations related to the IR are approved before the end of the year.

Mining regime

Another central axis of the tax reform will be the mining tax regime. What is contemplated for this are not new taxes, but the existing one will be perfected. Thus, it will seek to raise the IR rate for mining companies with more than 80% or 90% operating margin.

Minister Pedro Francke pointed out that the mining royalty and the special tax on mining would be perfected, and for this we are working with the International Monetary Fund (IMF) so that competitiveness in the sector is not lost.

The IMF will deliver today its advisory report, with which the increase in the Income Tax rate of the mining sector would be calculated.

Tax controversies

The reform also aims to make the resolution of tax disputes faster and more efficient and to avoid setbacks, obstacles and duplications.

In this sense, the management of tax litigation will be improved; that is to say, that the claim is as supported as possible and rules will be established to prevent the coexistence of procedures on the same matter. In addition, in complex cases criteria will be established so that the terms are adequate.

Francke also assured that they will eliminate the figure that allows offending companies to deduct the payment of their bribes as if they were company costs, in order to pay less IR, thus following the recommendations of the OECD Working Group on Bribery.

The head of the MEF reaffirmed the Executive’s commitment to provide an explanation to Congress and the public of exactly how much was additionally collected and how it was spent. “This is in no way a blank check. It is always established that later the measure has to be referred to the Congressional Constitution Commission, which, if it does not like it, can repeal or modify it “, he specified.

Adjustments to financial rules

Meanwhile, the superintendent of Banking and Insurance, Socorro Heysen, supported the Executive’s proposals on financial matters, after requesting Congress powers to legislate on them.

“We seek to modernize the General Law of the Financial and Insurance System for prudential supervision for financial stability. Also facilitate innovation and remove the barriers that exist for the development of fully digital entities, and facilitate competition, “he explained.

Among the main points is to improve the sanctioning capacity of the regulator, since the 1996 law was “outdated”. This would occur through an increase to the top of the fines imposed on the offending entities of the financial sector. And is that currently the maximum is 200 UIT (S / 880,000), an amount that is considered very low and disproportionate to the income of the largest companies. In short, the SBS proposes that the cap on fines be linked to the income level of the supervised entity.

“We would also be eliminating the minimum limit because there would be the problem that there are very small entities to which the minimum of the fine is imposed and it is excessive. And there are very large entities where the maximum of the fine may be little dissuasive, “he said.

Another point to highlight is that it seeks to reduce the minimum capital to form the Etcan, which are companies dedicated to the transport of money and values. This in order to generate greater competitiveness, since to date there are only two in the market, which generates cost overruns.

Likewise, to promote competition throughout the financial system, the SBS aims to eliminate existing barriers to forming a fintech (100% digital entities). “The current law indicates that the financial institution has at least one main office, that in practice might not be necessary for a purely digital entity. It is a very important issue to open the door to the development of innovation and growth of inclusion in the financial system ”, said the official.

It is also proposed to simplify the process of licensing and supervision of companies that do not collect deposits from the public, among other measures.

On the other hand, the president of the Banco de la Nación, José Chávez, indicated that the strengthening of the state entity would take a year and a half to then be able to offer financial services. That is, if the legislative powers are approved, it could only begin to grant credits to people and mypes from the end of 2023 at least.

It will be sought that digital platforms pay IGV

The Executive will modify the IGV Law to establish a collection mechanism for the importation of intangible goods and services provided through the internet by non-domiciled subjects.

In this way, digital platforms such as Netflix, Disney Plus, Spotify, among others, would pay IGV in Peru. As Minister Francke explained, international experiences are being analyzed to replicate them in the country.

Another measure included in the reform is the simplification of tax policy for the mype sector. What was anticipated is that the Single Simplified Regime (RUS) will be modified, thus eliminating the Special Income Regime (RER) and the Mype Tax Regime (RMT).

Finally, it will also be proposed to include the aquaculture and forestry sectors to Law 31110, which established the new labor and incentive regime for the agricultural sector.

The data

Cost of evasion. The Minister of Economy, Pedro Francke, reported that, currently, the annual cost of tax evasion in Peru amounts to 8% of the Gross Domestic Product (GDP), which for the current year would represent three times the health budget or twice its education budget. Likewise, it represents 10 times the resources allocated to social programs.

Ready to apply the tax reform

By Luis Vera Castillo, head of the Sunat

The Sunat is prepared in order to operationalize all the MEF proposals. The tax systems of the countries are constantly adapting and changing as a result of the changes that also operate in the operation of the businesses, in such a way that they try to cover and tax those spaces that are becoming evident. And this becomes even more important on this date when we are emerging from a post-pandemic crisis. In this sense, we see this delegation of powers necessary in order to adapt the tax system and achieve higher levels of collection.

Regarding the digital economy, what we do is collect an international standard that puts the floor even, because those who sell digital services and who are residents in the country are taxed, as opposed to those who do the same and who are from abroad. It’s just about putting the floor even for everyone.

Competition and transparency

By Juan José Marthans, former head of the SBS

The fines and penalties established by the SBS always need to be renewed and enhanced. It is a good time to do it. The diagnosis is also correct that as the fine is set according to the ITU and with caps, sometimes it does not reflect the magnitude of the lack of certain entities. I would recommend to MEF and the SBS that formally establish the permanent publication of the fines that are generated and the causality, with the effect of keeping track of the evolution of the type of offenses committed by each entity.

It seems good to me to seek to reduce entry requirements for flow transport entities (ETCAN), but also to promote in a timely manner incentives of all kinds (operational, tax, patrimonial) so that first-level financial entities quickly enter the national scene. This so that they can promote new product and cost offers so that the market tends to be more competitive than it is today.

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