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Peru Must Ramp Up Tax Compliance Efforts: IMF

by Mike Godfrey,, Washington

25 December 2012

Peruvian authorities must redouble their efforts to improve tax compliance rates if they are to deliver on their objective of improving the nation's tax take to fund social projects, the International Monetary Fund has said.

Responding to the nation's 2013 budget, the IMF welcomed a substantial increase in government spending of around 10%, a large proportion of which will be dedicated to social initiatives to improve income and wealth distribution. The Fund endorsed the inclusion of further measures to strengthen tax compliance and enforcement, but noted that authorities' medium-term tax targets will be challenging to achieve.

It highlighted that despite recent efforts, Peruvian tax collections are low compared with other emerging markets in terms of revenue mobilization and tax effort (ie. the ratio of actual revenues to potential revenues), and consequently investment and public social spending is lower than in other emerging economies with similar per-capita income.

The Fund commended efforts to strengthen SUNAT, the tax agency, but urged that this program must be stepped up. It called for ambitious policies in order for the Peruvian government to achieve their objective of raising the tax-to-GDP ratio to 18% by 2016.

According to statistics from the World Bank, Peru's tax-to-GDP ratio rose 1.1% in 2010, to 14.8%, from the historically low level of 13.7% in 2009. Previously, in 2007 and 2008, the nation had a tax-to-GDP ratio of 15.6% and 15.7%, respectively. This is comparatively meagre compared to the average in 2010 for Latin American and Caribbean countries at 19.4%, and well below the OECD average of 33.8%.

TAGS: compliance | tax | tax compliance | tax avoidance | law | budget | enforcement | Peru

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