"Being part of the informal sector means you are outside of the legal regulations and taxation, but it also implies that you don't count with the protection and services that the state can give you"-Hernando De Soto (1989)
Tax evasion and informality are major challenges for Peru's economy and society. According to
recent estimates, the informal sector accounts for around 70% of the country's workforce and
30% of its GDP. However, the tax evasion rate is up to 50% of the total tax revenue, which
means that a significant portion of the country's economic activities operate outside the formal
regulatory framework.
This has many social and economical consequences that disrupt the components that work
towards stabilization in the country and its people, including lower productivity, lower quality
jobs, and higher poverty rates. The informal sector also poses significant challenges for the
government, the tax administration, and other legal entities that operate for society as a whole,
as it limits the state's capacity to collect revenue, provide public goods and services, and ensure
social justice for all citizens. A study published in the journal Innovar (2019) suggests that one of
the main causes of tax evasion in Peru's informal economy is the lack of trust in the government
and the tax system. Additionally, the weak enforcement of tax laws and regulations contributes
to the problem. The consequences of tax evasion in the informal sector include a reduction in
government revenue, unfair competition for formal businesses, and erosion of social trust and
cohesion.
To address this issue, many experts recommend simplifying the tax system, providing tax
education and incentives for formalization, and strengthening the tax administration. Moreover, it
is essential to promote a more inclusive and equitable economy that benefits everyone, leaving
no one behind. Education makes up for a highly influential factor as well, since financial matters
are often better treated where we find improved learning curves across different cultures and
regions. As the country seeks to recover from the economic and social impacts of the COVID-19
pandemic, addressing informality and tax evasion is more crucial than ever. Peru’s informal
economy manages a great deal of importance in the financial sustainability of the country as of
itself, the percentage of the GDP that is represented by informality accounts for up to 37.4%,
meanwhile, for the rest of the countries within the OECD (Organisation for Economic
Co-operation and Development) the income represented by informality accounts for roughly
19.8%.
Furthermore, it's worth noting that Peru collects only 52.8% of its potential revenue, which is not
due to exemptions or other related phenomena but to high tax evasion, which has persisted for
many years (Ramirez & Nolazco Cama, 2016). This highlights the urgent need for action to
address tax evasion and informality in Peru's economy.
Addressing tax evasion and informality is critical to promoting a more sustainable and equitable
economy in Peru. By implementing policies and programs that encourage formalization, simplify
the tax system, and strengthen the tax administration, the country can enhance its revenue
collection, increase social trust and cohesion, and build a more resilient society for the future.
Bibliography:
Boitano, G., & Franco Abanto, D. (2019). The informal economy and its impact on tax revenues
and economic growth. The case of Peru, Latin America and OECD countries (1995 – 2016).
360: Revista De Ciencias De La Gestión, (4), 128-157.
https://doi.org/10.18800/360gestion.201904.005
Herrera, P. R. (2019). Elusión y evasión tributaria en el sector informal en Perú. Innovar: Revista
de Ciencias Administrativas y Sociales, 29(72), 187-197. doi: 10.15446/innovar.v29n72.79031
Ramirez, A. y Nolazco Cama, J. L. (2016). ¿Por qué la evasión tributaria es tan alta en Perú?
Un análisis experimental [reseña]. Universidad de Lima, Instituto de Investigación Científica.
De Soto, Hernando (1989), The Other Path: The Invisible Revolution in the Third World, HarperCollins.
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