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Standing Committee approved to reduce the VAT to 18%

By: Wens Silvestre

The Executive introduced Bill No. 4660 / 2010-PE-Tax Law General Sales and Excise Tax, which aims to reduce from 17% to 16% VAT, 2% holding in the IPM, accounting for a total of 18% VAT-IPM, which approved rate this afternoon the Standing Committee of Congress, after a debate over policy consideration than technical. On the eve of an election, everything is approved in Parliament without a serious analysis, simply using the wrong perception of the electorate to hear discuss measures such as reducing the GST. Reality shows us that the only ones who will benefit from this measure will be the mercantilist, because they move this tiny reduction in the final prices of goods and services to consumers.

The justification used is the same as always - favor the poor by reducing the impact of expected increase in international oil prices and food prices will directly affect the consumer goods, it is therefore necessary to implement measures that will reduce this impact in the population, such as the reduction of one percentage point of GST. And what about the role of the Central Reserve Bank, is it not the responsibility of ensuring monetary stability. Or is it that now the MEF aims to compensate the BCRP.

According to the explanatory memorandum of this project, estimates that reducing the GST rate by one percentage point corresponds to a decrease in the collection of S /. 1 530 million in 2011, however, on the eve, the Chief of the Sunat noted that the fiscal cost of this measure would be S /. 3 billion.

On the other hand, if we compare the rate of sales tax / VAT in Latin America, we can infer that the VAT rate in Peru is on the average, see:

Brazil: 25%
Urugual: 22%
Argentina: 21%
Chile: 19%
Peru: 19% (17% VAT + 2% IPM)
OECD: 18%
Colombia: 16%
Bolivia: 13%
Ecuador: 12 %
Venezuela: 12%

Interestingly, the three countries apply lower rates are those in a permanent crisis of inflation.

In countries such as Peru, where abounds informality and tax evasion and tax avoidance is rampant, this measure may justify the lower rate applicable the VAT, however, I do not encourage formalized, unless it has a significantly reduced rate of up to 3% (ideally 15% VAT).

On the appropriateness of the measure, finally, he political calculus, because in an election, anything goes. It had to do further study to make a decision as important as this.

The rationale behind the congressmen are just electoral character, because they know that if they vote against, hurt the candidacy of his party.

This measure was best left to the incoming government , but the die is cast. At this time, the Standing Committee has already approved the law reducing the VAT to 18%.