Peru Capital-Gain Tax Suffocates Stock Market, Exchange Says
The Lima Stock Exchange urged Peru to eliminate a 5 percent capital-gain tax on equities, saying it has deterred investors and contributed to a drop in trading volume over the past five years.
The country’s weighting in global portfolios has fallen 40 percent since 2010, and the tax has helped Chile become a regional financial center instead of Peru, the exchange said in a full-page advertisement in Lima’s Gestion newspaper. The levy also discourages capital flows to the country, the bourse said.
“This tax is a case of double taxation that suffocates a formal industry with high added value,” the exchange said.
The Peruvian government proposed to cut corporate and personal income-tax rates last month to stimulate an economy growing at its slowest pace in five years. President Ollanta Humala said Sept. 22 the government is studying eliminating the capital gains tax.
Peru’s central bank and the banking regulator are in favor of the move, the exchange said.
The Lima General Index dropped 1.4 percent at 2:45 p.m. local time, extending this year’s decline to 6.3 percent.
The drop in trading volume on the bourse is spurring Peruvian firms to sell shares overseas rather than listing them locally, according to Luis Ordonez, the head of research at Inteligo SAB, a Lima-based brokerage.
Intercorp Financial Services, which trades in Lima, filed Oct. 9 to sell shares on the New York Stock Exchange. Grana y Montero, Peru’s biggest construction company, sold shares on the New York bourse last year.
“There’s demand for Peruvian risk but it’s not in Peru, it’s going through New York,” Ordonez said by phone. “There isn’t sufficient incentive for people to invest in the Lima bourse.”
