What is the most significant change to your region/jurisdiction's tax legislation in the past 12 months?
Last year, in October, we had a very interesting tax reform, which included the application of anti-avoidance rule, and attribution of tax liability to the directors of companies. This reform adopts many Base Erosion and Profit Shifting (BEPS) criteria due to the desire of Peru to be a member of the Organisation for Economic Cooperation and Development (OECD).
What has been the most significant impact of that change?
Beyond the strict technical implications, I believe that the reform has generated greater reflection among businessmen about the need to implement internal protocols to ensure adequate compliance with tax regulations.
How do you anticipate that change impacting your work and the market moving forwards?
The reform has generated more awareness of the relevance of tax issues in all decision-making instances of companies, in addition to the adoption of regulations that are similar in several countries that would allow implementing certain standard policies in multinational companies.
How has this changed the way you offer tax advice?
Our role as tax advisers is in a constant process of change, even moreso in recent times, because we must stop having a local view of tax issues and start thinking about how internal regulations affect multinational corporations and how foreign regulations affect local companies. We need to have a complete and global vision of the issues and keep in mind that what the client expects is more than a technical specialist; they also want a strategist that will help their business to be efficient and healthy.
What potential other legislative changes are on the horizon that you think will have a big impact on your region/jurisdiction?
It is likely that the changes are more associated with broadening the tax base, to encompass sectors or individuals that have not been previously covered. This will be with the help of technology that allows more information to be collected more quickly, in addition to regulations that promote an expansion of Peruvian economic capital and that promote investment in technology and innovation.
What are the potential outcomes that might occur if those changes are implemented?
That tax issues are not only the concern of large companies, but of everyone, including individuals. This obliges us to broaden our perspectives as advisers.
Do you think that change will have a positive effect on both your practice and the wider regional/jurisdictional market?
All changes that seek to combat informality and to integrate even more into an increasingly globalised and technological world are welcome, and I believe that there has never been opposition from any business sector in that regard. The concern, and this may be the main problem in many Latin American countries, is to achieve a certain predictability in the rules and correct practices by the tax authorities. We, as specialists, must have an active role in achieving this balance, promoting clear rules and correct actions.
How are issues surrounding the taxation of the digital economy affecting your jurisdiction?
The digital economy is a great international challenge for the tax authorities, who still do not agree on how to properly tax it. This is due to the fact that tax systems are not adapted to the new ways of doing business that the great development of the digital economy implies in this fourth industrial revolution.
The problem occurs because the international tax system is based on the fact that in order to pay taxes in a country you need to have physical presence in it and in a digital economy you can have activity in different countries without a physical presence.
Peru is no stranger to this because, in its eagerness to belong to the OECD, it participates in the efforts to reach a global solution to the growing debate on how to impose taxes on companies in a rapidly digitising economy. It is implementing certain standards that focus on transfer pricing and the principle of competition.
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