Peru’s new Fujimori government has put tax reform, labor-benefit flexibility and a reduction in public holidays on the table, unveiling a draft bill at its first Cabinet session on July 29 that would ask Congress to delegate legislative authority for 120 calendar days.
The presidency announced that the proposal, whose stated goals are to strengthen public security and the national economy, would be approved at the next cabinet session, without specifying a date. The nine-page document targets seven areas: citizen security, entrepreneur formalization, employment promotion, productive development, state deregulation, state modernization, and tax and customs matters.
Tax Reform
On taxation and trade facilitation, the proposal covers four main points. The first would modify, simplify and optimize tax regimes and formal obligations, using mechanisms such as incentives, exemptions, tax credits, deductions and temporary special treatments.
The second would refine the Income Tax Law, including allowing deductions for employee training expenses and granting tax credits for hiring young workers and for training costs — a direct response to what the government described in its national address as a serious youth unemployment problem.
The remaining two tax measures would optimize the customs regulatory framework and reform the legal regime for judicial challenges to rulings by the Tax Court.
Carlos Gallardo, managing director of the Peruvian Institute of Economics (IPE), said the project was well-conceived because it addressed multiple aspects that any serious formalization proposal should include, going beyond the tax dimension to cover simplification measures that could drive business growth.
Jesús Ramos, a partner at DLA Piper Peru, said one of the most significant potential changes would be the creation of a single corporate income tax with marginal and progressive rates, replacing the current system of multiple tax regimes. He welcomed the idea of formalizing companies through a structure in which the tax burden rises gradually with income, and highlighted the possibility of new tax incentives — such as exemptions — to promote investment, employment, innovation and business formalization. He added that these tools could improve the country’s competitiveness and attract investment, provided they were grounded in sound economic policy and produced concrete gains in productivity and growth.
Ramos also noted the value of reforming how Tax Court rulings are challenged in court. He explained that cases currently arise in which the Supreme Court sets an interpretation of a tax rule, but the tax authority Sunat and the Tax Court itself continue applying a different standard in new audits, reopening litigation.
Jorge Picón, founding partner of Picón and Asociados, was more cautious, describing the request for delegated powers as extremely broad with no restrictions of any kind. He questioned why everything was being routed through delegated authority and warned that if approved, a large number of new rules would take effect without public discussion. He also argued that the country’s main growth obstacle — informality and illegality — would not be solved by adjusting tax rules, noting that Peru already has one of the highest effective tax rates in the region.
Labor Rules and Public Holidays
On labor, the proposal groups measures under two headings: protection of entrepreneurs and micro and small enterprises (Mypes), and employment promotion.
The text proposes unifying the legal framework governing labor activity under a progressive regime that encourages formalization, and modifying the tax treatment of Mypes to improve their competitiveness. It also calls for expanding the mandate of labor inspectorate Sunafil toward proactive promotion of formalization, rather than reactive enforcement.
One measure drawing attention is a proposal to reduce the number of public holidays, framed as a way to rationalize their use and foster productivity. The draft would also make labor benefits — including vacation, overtime, profit-sharing, bonuses and severance pay — more flexible.
Jorge Toyama, a partner at Vinatea and Toyama, welcomed the focus on productivity, noting that a Peruvian worker is roughly half as productive as a Colombian counterpart and nearly one-third as productive as a Chilean worker. He said the cost of public holidays falls hardest on small businesses, because paying triple wages does not necessarily translate into triple sales for sectors that benefit from those dates.
César Puntriano, a partner at the Muñiz firm, cautioned that the Sunafil announcement would be insufficient without additional budget and more inspectors, since the agency currently operates mainly in a reactive mode. He suggested that before cutting holidays, the government should assess the real impact on productivity and tourism, and proposed shifting mid-week holidays to Mondays as an alternative.
Toyama added that Sunafil’s formalization efforts should target Mypes above all, where informality reaches 95 percent — enterprises in peripheral urban zones and rural areas that the inspectorate has largely overlooked in favor of larger companies. Gallardo reinforced the scale of the problem, noting that 10.2 million workers are employed in Mypes but only 1.8 million appear on Sunat payroll records.
