Peru tax swap legislation to curb corruption - ProInversión
Peruvian legislation aimed at reforming a tax swap program for public works will spur more private investment and reduce corruption at local government levels, a state agency said.
The program, known as Obras por Impuestos, will now enable private companies to carry out infrastructure projects directly with regional and municipal governments as part of a drive to decentralize investment, private investment promotion agency ProInversión said in a statement.
Decree 1238, which modifies the original law 29230, aims to attract more investment by providing additional state financing in case the original contract terms fail to cover the cost of the project, ProInversión said. Project supervision may also be financed by the government, avoiding delays, it said.
"This is a very important as it guarantees that the private company can recover its investment," ProInversión said in the statement.
Permitting delays have increased project costs for concessionaires, sparking costly and time-consuming litigation and arbitration proceedings, according to infrastructure industry group Afin.
Infrastructure projects may include those in the areas of culture, the environment, sport, sewerage, agriculture and irrigation, health, education, tourism and security, according to the agency. Local governments will neither receive nor provide funds, reducing the risk of corruption, ProInversión said.
Government authorities who fail to meet their obligations will not be able to take on further commitments, the agency said. Local governments will also be able to dedicate their own personnel to other projects, it added.
"In a situation of less availability of funds, this is a tool that grants additional financing in addition to annual budgets that have already been programmed," ProInversión said.
The program covered 609mn soles (US$190mn) in 88 projects last year and 411mn soles in 2013. Under the scheme, 1.7bn soles has been invested in 169 projects, including schools, roads, water and sewerage and health since the program's implementation in 2009, according to ProInversión.
President Ollanta Humala, who is scheduled to step down in July 2016 following general elections in April, aims to increase the country's 2016 public budget by 6.6% to 138bn soles.
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