Peru Congress seeks to mitigate effects of financial crisis, cuts taxes on workers’ bonuses for next two years

Hoping to mitigate the effects of the global financial crisis, Peru’s Congress has voted to eliminate all taxes on workers’ bonuses for the next two years.

Peru President Alan Garcia is expected to sign the decree into law today, May 1, for International Workers’ Day.

Peruvian workers typically receive bonuses twice a year, on Christmas and on July 28, Peru’s Independence Day. Bonuses, which are worth a full-month’s salary, are sually taxed 21 percent, for pension fund and public health care services.

In addition to the tax slash, Congress voted 53-32, with 4 abstentions, to allow workers to fully access their May and November severance pays, over the course of 2009, daily La República reported Thursday. Lawmakers hope the measure will stimulate internal consumption.

“This law will affect social security and the pension fund system and will only benefit 10,000 to 20,000 workers that earn high wages,” said APRA Congressman Daniel Robles, who voted against the decree. “People who earn little won’t get anything…the money should be used to benefit everyone equitably. This law isn’t fair.”

The law, which will cost the government 635 million soles, or $211 million, only applies to the 5 million workers who earn more than 1,500 soles, or $500, per month.

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