Government approved the expansion of sources of financing for works for taxes

The Executive power approved the modification of the mechanism of works for taxes (OxI), which will allow regions that do not have income from fees and surcharges to use other sources of income for the development of investments in partnership with the private sector. The measure will promote the development of investments and contribute to the actions scheduled to close gaps in public services.

Within the framework of the powers granted by Congress in tax, fiscal, financial and economic reactivation matters, the government approved the modification of the Law No. 29230 (Law that promotes regional and local public investment with the participation of the private sector) to extend the sources of financing for investments involved in this mechanism.

“The current regulations only allowed the OxI mechanism to be financed with the income from the canon and surcharge to which some regional and local governments have access. With the measure approved by the Executive Power, investment projects via OxI can be financed with funds such as FONCOMUN, FONCOR and FOCAM; as well as with municipal taxes, resources directly collected and ordinary resources. In other words, all regional and local governments will be able to use it”, explained the Minister of Economy and Finance, Oscar Graham.

Another modification to this mechanism is that it will also be allowed to finance ordinary optimization, marginal expansion, rehabilitation and replacement (IOARR) investments and those that arise in an emergency situation. You can also invest in operation and maintenance activities.

“It must be taken into account that in the Education sector, 91% of educational establishments are in rural areas. What’s more, 73% of the infrastructure of this sector in urban areas requires maintenance. Both could benefit from the OxI mechanism”, explained Graham.

Impact and next actions

The Minister of Economy and Finance affirmed that these measures will accelerate the execution of investment in regional and local governments and will allow private companies to participate in the execution of a greater diversity of interventions. This could be translated into a greater amount of additional investment to the current portfolio of projects that has interest and financing from the private sector, considerably reducing the delays in its execution and the excessive increases in the work budgets.

“The potential effect of the expansion of financing for regional governments will mean an additional investment of approximately S/ 5,264 million. Meanwhile, for local governments, this impact would be S / 10,275 million”, he highlighted.

Likewise, he specified that public entities will be allowed to take advantage of the efficiency of the private sector from the design, adhering to its parameters and costs, subsequently avoiding excessive increases in the execution phase of the agreement.

Finally, The minister pointed out that the MEF will continue to review the regulatory framework that regulates the OXI, in order to simplify the evaluation processes and speed up the execution of investments, counting for it with the participation of all the actors involved.

In addition, the issuance of a regulation that guarantees private sector actors the recognition of investments made in exchange for taxes, regardless of the authority that exercises the position in subnational governments, will be evaluated.