In October 2021, the MEF asked Congress for the delegation of powers to legislate on tax matters with the aim of increasing tax collections and doing so by adding progressivity to the Peruvian tax system. The initiative being developed by the MEF contains (tentatively, to date) around 40 specific measures—some administrative, others related to tax policy—that the MEF hopes will, as a whole, generate additional revenue for the treasury. The tax collection impact of quite a few of the measures (including those pertaining to the mining sector) has not been estimated, whereas the measures for which there is a calculation are estimated to bring in a little over 1 percent of GDP in revenues. Given Peru’s low level of tax collections, both relative to its own historical trends as well as those of other countries in the region, the amount expected to be collected with the proposed reform is modest. However, increasing tax collections by enhancing progressivity would appear to be the right approach.
II. FISCAL REGIME OF THE MINING SECTOR
A. Mining in Peru
B. Recent History of the Mining Fiscal Regime in Peru
C. Evaluation of the Fiscal Regime for Mining
D. FARIAnalysis of the Mining Fiscal Regime in Peru
E. Comparative FARIAnalysis of Mining Fiscal Regimes in Peru and Other Mining Countries
F. Alternatives to Modifying the Mining Fiscal Regime Under Consideration by the Peruvian Government
G. Other Tax Aspects Applicable to Mining in Peru
H. Fiscal Parameters in Other Mining Countries
III. CAPITAL GAINS TAX
Other fixed assets
Source: Ministry of Economy and Finance.
17. For the FARIanalysis, and for both projects governed by the Income Tax Law and projects with a TSC, the entire investment is assumed to depreciate over five years . This is due to the fact that none of the mining projects used in the analysis present disaggregated information allowing for the application of various depreciation rates as shown in Table 4 for each investment category. A flat depreciation rate is therefore applied to all
In FARIanalysis, the METR is defined as the wedge that the tax system drives between the minimum after-tax return that the investor requires and the pre-tax project return needed to realize it. The METR reflects the burden placed by the fiscal regime on a project at the margin of viability (i.e. projects that lie at the far end of a sector’s cost curve), thus indicating the extent to which the regime affects business investment decisions.
This manual introduces key concepts and methodology used by the Fiscal Affairs Department (FAD) in its fiscal analysis of resource industries (FARI) framework. Proper evaluation of fiscal regimes for extractive industries (EI) requires economic and financial analysis at the project level, and FARI is an analytical tool that allows such fiscal regime design and evaluation. The FARI framework has been primarily used in FAD’s advisory work on fiscal regime design: it supports calibration of fiscal parameters, sensitivity analysis, and international comparisons. In parallel to that, FARI has also evolved into a revenue forecasting tool, allowing IMF economists and government officials to estimate the composition and timing of expected revenue streams from the EI sector, analyze revenue management issues (including quantification of fiscal rules), and better integrate the EI sector in the country macroeconomic frameworks. Looking forward, the model presents a useful tool for revenue administration practitioners, allowing them to compare actual, realized revenues with model results in tax gap analysis.