A new online tax calculator for Peruvians, developed by Contribuyentes por Respeto (CpR), has been officially adopted as standard by the SUNAT tax collecting agency, the Peruvian equivalent of the American Internal Revenue Service.
Based in Lima, CpR developed the free tax calculating software to help Peruvian small business owners understand the complex tax structure of the nation. Based on a similar tax calculator developed by the Lithuanian Free Market Insitute, the program attracted the attention of SUNAT, the Peruvian government tax collecting agency, and a major small business guild. SUNAT then approached CpR to develop a partnership, and the two organizations plan to roll out an improved version of the tax calculator in May 2018 to be used by all Peruvian citizens.
“Every Peruvian citizen has the right to receive quality public services, but at the same time has the obligation to pay those taxes and tributes that are necessary to sustain the public sector,” said Jose Ignacio Beteta, executive of CpR. “Nevertheless, paying taxes has become also a burden, not only because some of them are excessive but because the payment process is difficult and tiring. These two elements explain why rates of informality [working under-the-table] are so high in Peru (almost 70 percent) of labor informality and 83 percent of businesses informality).”
The main target audience of the original tax calculator is small business owners. Small and micro-businesses comprise 22 percent of Peru’s GDP and make up more than 99 percent of Peruvian businesses. Many of these enterprises, due to the complexity of the tax structure in Peru, simply conducted business and payed employees under-the-table, which has stymied tax collection efforts. Understanding how taxes can affect the Peruvian citizenry can lead to further pushes to simplify the tax code and reduce taxes.
Contribuyentes por Respeto is a recipient of Atlas Network’s Liberating Enterprise to Advance Prosperity grant, which offers support to think tanks outside of North America with ambitious and achievable plans to improve the public policy and regulatory environment in their countries, particularly in relation to limits on enterprise and entrepreneurship as measured in the Doing Business Index. CpR received this grant for its tax calculator project.