ANOTHER PATH:

The simpler, the better: Peru’s tax reform program succeeds by making it easier for companies and individuals to pay (Daniel Drosdoff, 5/06/04, IDB America)

In a region famous for low levels of tax collection, Peru has dramatically increased tax revenues through a comprehensive program aimed at increasing efficiency and effectiveness.

With constant technological updating, personnel training, professional upgrading and a strong government commitment, the country has increased tax collections from around 6 percent of the gross domestic product in 1990 to 12 percent in 2002.

The medium-term goal of the National Superintendency of Tax Administration (SUNAT) is to add two percentage points to the 2002 level of collection, raising it to 14 percent of the GDP. This level was briefly achieved in 1997, before a recession and a government decision to grant a series of tax exemptions to special groups.

Prior to the tax reforms of the 1990s, says Daniel Casella, an advisor to SUNAT, citizens carried a tax document “which didn’t make clear whether or not they were paying.” Controls were “deficient” and “manual, unsupported by computer systems.”

The first phase of the reform focused on simplification, with 50 different taxes reduced to four. Employees were taxed at a flat rate, deducted by their employer, and banks were enlisted to help with collections.

It's one thing to fall behind Chile in government reform, but Peru?

Posted by Orrin Judd at May 6, 2004 2:30 PM