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IMF Recommends Revenue-Raising Measures For Peru

by Mike Godfrey, Tax-News.com, Washington

19 July 2016


Peru has come a long way in improving the efficiency of its tax system in the last 30 years but further efforts are needed to reap the full benefits from these reforms, the International Monetary Fund (IMF) has said.

The country's tax-to-GDP ratio, slightly above 15 percent, remains below the regional average, and is even lower than this average if commodity-related income is stripped out, the Fund said in its 2016 Article IV consultation report for Peru. Policy efforts should focus on improving revenue collection while avoiding tax rate cuts, it said.

The report noted that local revenues are relatively low in Peru and there is ample space to increase property tax collections. An essential aspect of this effort should be to change how properties are valued for tax purposes, bringing the base closer to market values, together with modernizing the administration of local cadastres, it said. The IMF said that this would not only increase revenues, but also improve the progressivity of the whole system.

The IMF advised the country's subnational governments to reduce their "too-heavy reliance on volatile natural resource revenue" and switch to more stable sources of income.

The report also called on the Government to increase efforts to improve tax compliance. It recommended improving anti-avoidance rules to protect the tax base, with special attention given to taxation of capital gains on indirect sales of Peruvian assets.

TAGS: compliance | tax | tax compliance | property tax | tax avoidance | revenue guidance | International Monetary Fund (IMF) | Peru | tax reform

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