CGT Blamed For Plunging Stock Trades In Lima

by Mike Godfrey, Tax-News.com, Washington

19 July 2010

Roberto Hoyle, president of the Lima Stock Exchange, has blamed the fall in trading volumes on the exchange in the first six months of 2010 on the capital gains tax introduced at the end of 2009.

In spite of Peru's buoyant economy, and healthy demand for minerals, volumes were down 33% compared to the same period of 2009.

Hoyle explained that Peru’s stock exchange was the only one in the region to experience a drop in volumes, saying: "Between January and October last year, the exchange averaged PEN25m (USD9m) a day and is now trading at about PEN10m a day." He said Lima was unique in the world to have suffered a decline in trading volumes during 2010 and was also concerned at the effect it would have on the integration of exchanges in Lima, Bogota and Santiago, the first phase of which is due to commence in November.

Hoyle noted that Peru’s tax was not competitive with Chile and Colombia. In Chile shares transactions were exempt from tax and Colombia exempted from tax transactions in shares, provided they did not exceed 10% of the total issued shares of the respective companies.

"What we ask for is not that the Lima Stock Exchange should stop paying taxes, but that the tax treatment should be similar to Chile and Colombia, so we are allowed to compete on equal terms", he said.

Deputy Minister of Economy , Carlos Casas, denied that the fall in volumes was linked with the capital gains tax and pointed out that the exchange had performed well until April but the downturn was connected with European markets volatility. Since it was mainly mining shares that were traded, Casas claimed that anything affecting commodities would have an impact on the local securities market.

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