Peru President Humala Picks Fight With Telefonica Over Back Taxes

[Judi Lynn]

OCTOBER 31, 2011, 2:09 P.M. ET.
Peru President Humala Picks Fight With Telefonica Over Back Taxes
By Robert Kozak

Of DOW JONES NEWSWIRES LIMA (Dow Jones)--President Ollanta Humala's administration is in a dispute with Peru's largest telecommunications operator, Telefonica del Peru SAA (TDP.VL), claiming the company owes back taxes worth some 2.0 billion soles ($740 million).

The dispute has dragged in high-level officials, such as the King of Spain, and provoked calls from members of Peru's Congress for the government to refuse to renew an operating license with Telefonica until the taxes are paid.

Telefonica said it pays a lot of taxes in Peru and most of the outstanding money the Peruvian state wants to collect is actually fines and interest on taxes that shouldn't be levied.

The Humala government is aiming to increase tax revenue to fund various social programs. One of its first moves after coming to power on July 28 was to bump up taxes in the mining sector.

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