Works for taxes: an unfinished project

By Taxpayers Association

Since last September 14, the new regulation for the mechanism of works for taxes (OxI), a modality little exploited since its creation in 2008. Faced with a discouraging situation like the current one, with 2,346 paralyzed works throughout the country, according to Comptrollerand poor execution of the budget for public investment, due to lack of project formulation, works for taxes can provide some light at the end of the road.

The OxI mechanism is an agreement between a state entity and private companies so that the latter finance and execute public investment projects, in exchange for being exempted from up to 50% of their income tax payments. Since it was created, it has been possible to invest S/6,300 million through this modality.

Public investment is key because it allows the construction of roads, hospitals, schools, bridges and other infrastructure that improves the quality of life of the most vulnerable citizens, but in the last 5 years, public entities have returned a third of the budget earmarked for this end; that is, more than S/100 billion could not be invested due to lack of capacity to formulate investment projects.

The mechanism reached its peak in 2016, but from this year the investments plummeted. In 2021, just over half (57%) of what was achieved in that year was invested. Even in 2020, the year of the pandemic, barely 21% of what was invested in 2016 was reached. If we look at it by level of government, it is the Executive that uses it the least.

Among the factors that discourage the use of the OxI is the recurring delay in the delivery of documentation by public entities. There is also a lack of technical capacity of officials at all management levels and ignorance of the regulations causes the paralysis of projects.

Also, before the regional governments and municipalities could only use canon resources. However, the new regulation -approved with DS N°210-2022-EF- seems to be good news, because it will include this mechanism for maintenance and repair works, and not only for new projects. Additional municipal funds such as Focam, Foncor and Foncomun may also be used, including ordinary resources for certain types of works.

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“The new regulation aims to give a boost to the mechanism, especially among these entities that control more than half of the health and education budgets. But they will not be able to do so without a clear commitment to training human capital in subnational governments. In addition, an investment is required from the National Government for free training in the mechanism of works for taxes”, says Raúl Laberthe, researcher at the Taxpayers Association.

Works against anemia

One out of every two Peruvians is in a situation of food insecurity, due to the inaction of the State and the high cost of food. The lowest socioeconomic segments of the population are the ones that suffer the most, because they allocate between 50% and 60% of their family income to the purchase of food. This has led to the fact that in 13 of 25 regions of the country, more than half of the children under 3 years of age have anemia. No region shows a low level of anemia.

One solution could be to expand the mechanism of works for taxes (OxI) for projects that fight anemia, as proposed by the National Society of Industries.

“More than five million Peruvians currently suffer from anemia, a situation that was aggravated by the pandemic, affecting the development of boys and girls in the preschool stage,” says the SNI.

The union also plans to promote the consumption of food, such as rice with nutrients, and develop a map of nutrition in Peru, to monitor all programs that combat anemia.

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