Legislating for social impact: 'Works for Taxes' in Peru

Works for Taxes is an innovative piece of Peruvian legislation that allows companies to pay a portion of their tax bill by undertaking public works. When SABMiller’s director of sustainable development, Anna Swaithes, mentioned the legislation at The Crowd’s February forum there was much appetite to find out more. We’ve taken the opportunity to dive a little deeper into the work to show how the mechanism works in practice.

Peru’s largest brewer and a subsidiary of SABMiller, Backus, was a pioneer of Works for Taxes, helping the government to devise the regulatory regime and completing the first project under its auspices.

A list of priority projects are drawn up by authorities at either a local or regional level. Companies then choose a project from the priority list and work alongside the authorities to finance and execute the works.

A flagship of Backus’ investments through Works for Taxes is the six-lane Chilina Bridge spanning the Chili River Valley (shown in the image above). It was part of a consortium of three companies that underwrote the US$87.5 million budget. When it opened in late 2014, the bridge gave drivers in Peru’s Arequipa region some relief from the traffic congestion that has frustrated them for decades.

“We believe this is a good mechanism to align the interests of government, local communities and businesses,” says Malena Morales, director of sustainable development and corporate reputation at Backus.“Because the investing companies execute these projects with government supervision, both parties are able to assure their quality and sustainability, as well as keeping to a tight cost and time structure. It’s our reputation at stake so we do all we can to ensure these are top-quality projects.”

Backus adopts a multiple benefit approach when selecting projects to invest in. For example, improvements to the road network such as Chilina Bridge help to reduce the company’s distribution costs alongside the benefits they bring to other businesses and the wider public.

Sometimes the benefits are even closer to home. Backus’ has invested in the renovation of two major thoroughfares that adjoin the company’s brewery in Arequipa. Newly enhanced storm drains ensure that flash flooding – severe enough in the past to breach the brewery’s outer wall – present less of a risk in future. The rebuilt roads provide direct benefits to an estimated 118,000 citizens in the local district, thanks to improved traffic flows.

Keren Trapunsky, Backus’ corporate social investment manager, takes day-to-day charge of the company’s Works for Taxes programme. She emphasises the importance of partnership between public and private sectors when it comes to completing projects successfully.

“The relevant local authority must be fully committed to the project, otherwise it will fail,” she says. “They prioritise the projects and sign off on progress made, without which the project won’t qualify to be offset against tax. The effort required across our business to manage the projects means we can only undertake a certain number at any given time, however we estimate that around two million Peruvians are going to benefit from the works we’ve completed so far or which are under way.

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