As part of the tax reform, the Executive Branch plans to raise the tax rate (IR) of first and second category income, which includes income from the sale and rental of real estate, interest, royalties and dividends, among others.
As explained by the Minister of Economy and Finance (MEF), Pedro Francke, the rate on capital income is currently 5%, while the rate on worker income is between 8% and 30%, which is why it would seek to reduce the gap between one and the other.
According to Francke, the capital income rate would rise to a maximum of 10%, that is, it could even be doubled.
“On the first and second category rents, we would think to increase them slightly, not more than 10%, to the maximum”, Francke said.
The head of the MEF specified that many countries in Latin America already have higher capital gain rates, as they seek to achieve more justice.
Impact
Although this measure also aims to raise revenue, it would have an impact on individuals who have income through the sale or rental of a property.
David Zamora, founding partner at BZ Estudio, explained that IR to capital income is normally cheap because it seeks to encourage individuals to save and invest their money in assets, Therefore, if the rate is increased, what it would generate is that there is more informality in the real estate market.
“There is a high rate of tax evasion in what are rents with the rate of 5% and also that the real estate market by the pandemic itself is hit. People are not managing to place their properties or tenants are not paying because they do not have money, increasing a tax to 10% will generate more informality instead of collecting ”, said the taxpayer.
Dante Sanguinetti, partner of the Philippi Prietocarrizosa Ferrero DU & Uría study, also agrees on this, since a potential consequence would be an increase in tax evasion.
“There are few people who declare rental income from property with 5%, if this goes up to 10%, what will the evasion level be?” It is going to generate an informality ”, warned Sanguinetti.
Zamora added that this would also impact natural persons who obtain income from their rental of premises, garages, among others.
Meanwhile, the professor of the EPE UPC business school Jorge Ojeda said that this proposal is not specifically directed at high-income people.
“The first category has to do with rentals and it is not necessarily well-off people who end up renting a property. What could boost is that people who are currently paying their taxes based on their rents end up evading these taxes. This would lead to a reduction in what is collected from rents ”, warned the professor.
Prices would rise
Another consequence of raising the property sales and rental tax would be for prices to rise.
The experts consulted agree that when a tax is increased, this is transferred to the consumer.
“If they tell me that of what I charge you I have to give 10% to the State, I have to raise your rent,” said David Zamora.
Homogenize rates
The IR to the second category also includes income from dividends, stocks, and capital gains.
Given this, the professor from the Universidad del Pacífico indicated that it is an international trend that sources of income pay the same rates, since dividends only pay 5%, while natural persons between 8% and 30%.
“The international trend is that the charges are homogeneous and not only that. When some authors are reviewed, they say on the contrary that income associated with assets should be more taxed than income associated with work ”, the professor highlighted.
In Alarco’s opinion, what the Executive is proposing is a slight advance to standardize rates, despite the fact that there are international recommendations for capital income to have a higher rate than earned income.
Collection progress
According to the latest figures from the National Superintendence of Customs and Tax Administration (Sunat), the first and second category income tax, between January and September of this year, collected S / 3,182 million.
In detail, only in September the second category income tax managed to collect S / 473 million, which represented a growth of 325% when compared to the similar month of 2020. This performance occurred as a result of an extraordinary payment related to the distribution of dividends. If we look at what was collected between January and September, the figure amounts to S / 2,732 million.
Meanwhile, the first category IR raised S / 450 million in the first nine months of the year, which meant a growth of 12.5%.
It is appropriate for platforms to pay IGV
Another measure proposed by the tax reform is to modify the IGV law to establish a collection mechanism so that digital platforms such as Netflix, Spotify, Disney Plus, among others, pay this tribute.
In this regard, the professor at the Universidad del Pacífico German Alarco He said that it is necessary for platforms to pay IGV in the country, as their use has increased exponentially as a result of the pandemic.
“I think it is a good time to do it,” added the professor.
He also stressed that in European countries they are already paying taxes, as well as in Chile and Colombia.
Indeed, In Spain, the Netflix platform paid a total of 1 million 125 thousand 547 euros in taxes, which represented more than double the amount paid in 2019, according to Europa Press.
Reactions
Pedro Francke, Minister of Economy
“It is an issue that has its complexity because capital mobility makes it difficult to establish equal rates among all, but many Latin American countries already have higher capital gains rates.”
David Zamora, tax expert
“People are not managing to place their properties or tenants are not paying because they have no money, increasing a tax to 10% will generate more informality instead of collecting.”
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