on Thursday affirmed that Peru registers extremely low tax collection and social spending, being the reasons why it is necessary to improve the tax administration so that the State can rely on greater resources.
"The essential problem is that Peru has extremely low tax collection and social spending. In terms of tax revenues, Peru stands at around 20% (of GDP), while the OECD
is at 40%, and the Latin American average stands at 27%, quite a long way," he expressed.
The Cabinet member explained that the eventual granting of legislative powers by Congress will allow the Executive Branch to establish —quickly and coherently— a set of regulations aimed at strengthening the fiscal and tax policy so as to generate the necessary revenue to improve sectors such as: education, health, water, rural connectivity, and support for farming activities.
"We want to improve the tax administration so that the State can rely on resources and meet the needs that we face in terms of education and health, among other objectives," he indicated.
The government official said it also seeks to increase competitiveness and transparency of the financial system, focused on financial inclusion and digitalization, as well as support the economic reactivation process, boosting public and private investment.
"We are also bringing up some elements in financial matters to enhance competition and services for users, in addition to some measures related to public management in economic matters," he added.
Moreover, the minister argued that an essential problem is that non-compliance with tax payments in Peru is quite huge.
"The most relevant data is that barely half of income tax is paid with respect to what it should be," Francke said.
"This means that we are well behind Pacific Alliance
countries, as well as our peers in Latin America and the OECD countries," he added.
The economist indicated that tax evasion accounts for 8% of GDP and three times the health budget. Thus, only by eliminating this problem could the health sector budget be quadrupled, although evasion is also 11 times higher what is spent on water and sanitation.