Two sectors, two approaches

This chapter describes the institutional framework to which firms in mining and hydrocarbons sector are exposed. It explains the basic model in detail and introduces some particularities of each subsector. The chapter discusses the limitations of available data and describes the empirical strategy implemented to deal with it. It introduces accelerated depreciation in Deacon's model as an important feature of the Peruvian framework. The taxes and contributions that comprise the Peruvian tax system and that affect the mining and hydrocarbons sectors throughout the whole entire production chain can be classified in four types: transaction taxes, wealth taxes, compensation for the exploitation of natural resources, income taxes. Royalties are a percentage of the production value of hydrocarbons extracted by the contractor, calculated on international prices. The contract contemplates for the exploitation consortium a differentiated scheme of royalties to be applied to the three different products that are feasible to be exploited: oil, liquid gas and natural gas.