This document summarizes an interview with Paulo Pantigoso of EY Peru about reforms that could improve Peru's tax system and increase tax collection rates and foreign direct investment. Some key reforms proposed include implementing a "Services for Taxes" program to improve public services, allowing regional investment certificates to be deducted from VAT in addition to income tax, simplifying the tax filing process for individuals and businesses to reduce costs and informal work, and signing more double taxation treaties to increase foreign investment.

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230 TAX INTERVIEW
Paulo Pantigoso, Country Managing Partner, EY Peru
What kind of reforms to the Works for Taxes
scheme would help optimise the programme?
PANTIGOSO: First, as a recommendation to be con-
sidered, implementing a similar scheme called Ser-
vices for Taxes would enable public companies at all
levels of government to rely on the expertise and
knowledge of service companies. This would improve
the quality and efficiency of public services. Second,
regional and local Public Investment Certificates
(Certificados de Inversión Pública Regional y Local,
CIPRL) could be deducted from the financing com-
pany’s value-added tax debts in addition to being de-
ducted from the income tax. This would be especially
valuable for companies at a year-end fiscal loss that
are therefore incapable of filing income tax. Further-
more, costs incurred by the financing company when
hiring consultants and project managers should also
be deducted as part of the CIPRL. Agreements should
also include a percentage of the total budget estab-
lished by the public entity in order to cover additional
miscellaneous costs associated with completing any
project. Moreover, it is important to enhance the effi-
ciencyoftheNationalSystemforPrivateInvestments.
The excess of requisites demanded by this institution
has resulted in more than 4000 Works for Taxes pro-
jects being halted. Finally, for more informed deci-
sion-making, ProInversión could publish a ranking of
public entities that use the Works for Taxes scheme.
Which measures would help increase tax collec-
tion rates from companies in Peru?
PANTIGOSO:Alargepercentageoftheeconomycon-
tinues to be run informally, which has a direct impact
on the state’s ability to collect taxes. Key to tackling
informalityissimplifyingtheprocessoffilingtaxesand
reducinglabouroverruns.Informalcompanieswillnot
takeanystepstowardsformalisationifdoingsomeans
incurringtheexcessiveoverruncosts.Anymeasureto
tackle tax evasion and contraband must be followed
by some relief in the process of declaring taxes, which
we hope will finally facilitate compliance.
How can Peru’s tax framework be simplified to in-
crease the country’s competitiveness?
PANTIGOSO:InPeruthetaxyearandcommercialyear
run concurrent to the calendar year. As a result, 7.2m
naturalpersonsand500,000legalpersonsclosetheir
financial and tax year on December 31 at midnight.
This creates bottlenecks at the Superintendency of
Tax Administration. Thus, the first measure to simplify
the tax framework would be to have multiple closing
dates throughout the year, as is done in other coun-
triessuchastheUS,Germany,SwitzerlandandtheUK.
Furthermore, Peru’s competitiveness largely depends
on its ability to simplify the process and decrease the
cost of filing taxes, especially for natural persons and
smallandmedium-sizedenterprises.Lessinformation
should be required, together with fewer compliance
rules. Large companies should not be subject to the
administrative burdens they are currently exposed to
when filing taxes. Streamlining systems such as the
Obligatory Tax Payment System, as well as the with-
holding and income tax systems, is also a necessary
measure. The tax framework can also be simplified by
reducingthetimescaleoftaxlitigations,asitscurrent
length decreases the country’s competitiveness and
increases uncertainty among investors.
What type of fiscal measures could help increase
foreign direct investment (FDI) levels?
PANTIGOSO: Foreign companies in Peru are subject
totheseverityofauthoritiesregardinginformationon
commercial transactions when interpreting tax laws.
In order to increase FDI volumes, Peru must sign more
double-taxation treaties. Specifically, in addition to
our existing agreements, we should sign treaties with
all those countries’ main commercial partners. This
shouldbeatoppriorityforthenewtaxadministration.
Paulo Pantigoso, Country Managing Partner, EY Peru, on
suggested improvements to the tax structure
New ideas for a better system