Legislation

Peru – Bill could affect excise tax rate on casinos

By James - 14 November 2022

A bill aimed at changing how tax rates are set has resurfaced in Peru and is gaining momentum. Originally presented by Congresswoman Patricia Chirinos in 2021, the bill states that for the first time Congress would be in charge of determining the application of taxes for goods such as alcohol and tobacco as opposed to the Ministry of Finance (MEF).

The bill is gaining ground at the expense of the MEF, which would lose its power to set the amount of the selective consumption tax.

Under present regulations at the beginning of each year the amount is updated based on the consumer price index, and if an encumbered asset experiences an increase of more than 1 per cent per year in its final price, the ISC is raised in order to recover the tax burden by the MEF. Congress is now seeking to assume this technical function through bill PL 536-2021.

Recently, the Economy and, the Constitution and Regulations commissions both issued favourable opinions on the bill.

According to Carlos Casas, former Vice Minister of Economy modifying the ISC gives the MEF greater flexibility, which has much faster response times than congress, and lobbying groups have less impact on the tax rate.

However if the new bill goes forward it could cause delays in the long run meaning that it could be in fact a way to stall increases on taxation. According to a number specialists, if a favourable vote is obtained the law would force the Government to request legislative powers from Parliament to change the ISC rates as this function currently falls under the purview of the Ministry of Economy and Finance.

Alonso Segura, former Minister of Economy, told La República that the rule is being promoted by “those actors who are currently affected by this tax and what they seek is to paralyze the Executive in this matter.”

In 2019 The Ministry of Economy and Finance (MEF) published new rules covering new taxes on the gaming industry. The new measures applied the tax on casino games and slot machines and went into effect on January 1st. The tax had until then been imposed on the sale and import of certain goods such as fuels, cigarettes, beer, liquor, and soft drinks.