Peru’s tax-to-GDP ratio remains low despite decades of economic growth, prompting recommendations to broaden the tax base, strengthen compliance and reform tax expenditures (TEs), personal income tax (PIT) and Private Special Economic Zones (ZEEPs).
Peru needs to strengthen its tax system as low tax revenues, high informality and weaknesses in tax compliance continue to limit revenue growth, according to a report published on 25 August 2026.
The report recommends broadening the tax base, rationalising tax expenditures (TEs) and improving tax design. Peru’s tax-to-GDP ratio stood at 16.3% in 2024.
Peru’s tax-to-GDP ratio has remained between 15% and 19% despite three decades of economic growth. The report said tax revenues are also highly volatile because of changes in mineral prices. It called for greater contributions from other growing sectors, including agro-exports and tourism, to improve long-term tax buoyancy.
Changes to personal income tax (PIT) are among the proposed measures. The report recommends reducing the basic tax allowance from 7 UIT to 5 UIT and increasing the rate on domestic dividends and capital gains to 10%. It also proposes a gradual move towards a dual progressive income tax system covering employment and capital income separately.
The report also highlights informality and tax enforcement as key areas for reform. It recommends stronger action against fabricated VAT invoices issued by inactive companies and a review of simplified regimes. Reducing labour informality, it said, will require coordination between tax, labour and social protection policies, as well as stronger enforcement.
The report further recommends tighter safeguards for Private Special Economic Zones (ZEEPs) to protect the domestic tax base. Peru should assess ZEEP tax incentives against the Global Minimum Tax and Pillar Two, while ensuring that tax reforms support formalisation, public investment and social protection.
