IDB backs better tax, customs management in Peru

The Inter-American Development Bank (IDB) has approved a $15 million loan to Peru in an effort to improve its tax and customs management, both at the national and municipal level, with the goal of increasing structural government revenue as a percentage of GDP.

At the national level, Peru will improve the effectiveness of the tax and customs oversight carried out by the National Directorate of Customs and Tax Administration (SUNAT in Spanish) by implementing systems aimed at improving taxpayer compliance and will develop a Coordinated Border Management (GCF in Spanish) program. This is a groundbreaking initiative for the region, which seeks tighter customs controls and more streamlined trade and circulation of travelers using modernized computer systems to conduct these tasks.

Also, the project will improve management of the public revenue policy carried out by the Ministry of Economy and Finance (MEF in Spanish), with an emphasis on collecting taxes at the municipal level. In particular, a New System of Municipal Tax Collection (NSRTM) will be developed and designed to improve the tax administration policy carried out by municipalities. The same new instrument will be used in a sample of urban municipalities. The new tool will boost municipal tax revenues, in particular from property taxes, which in 2012, as a proportion of GDP, accounted for just half of the average for other countries in Latin America and the Caribbean.

The IDB has a long track record of supporting tax and customs policy and administration, both in Peru and other countries of the region, favoring the exchange of good practices on issues similar to those which will be financed by this operation.

The estimated cost is $73 million, of which $15 million will come from the IDB’s ordinary capital and $58 million will be contributed locally.

The loan is over 8 1/2 years with a grace period of 6 1/2 years, and an interest rate based on LIBOR.