US embassy cable - 05LIMA4228

UNCLAS LIMA 004228 
 
SIPDIS 
 
SENSITIVE 
 
DEPT FOR WHA/AND, WHA/EPSC, EB/IFD/OFD, EB/CBA, EB/IFD/OIA 
TREASURY FOR OASIA/INL, DO/GCHRISTOPOLUS 
COMMERCE FOR 4331/MAC/WH/MCAMERON 
USTR FOR BHARMAN/DWEINER 
 
E.O. 12958: N/A 
TAGS: EINV, ECON, ETRD, PGOV, PE 
SUBJECT: ANOTHER ATPDEA DISPUTE RESOLVED 
 
REF: A) LIMA 4033   B)LIMA 2017  C) LIMA 995 
 
1. (SBU) Summary. The General Manager of Luz del Sur (owned 
by New Jersey-based PSEG and Californian Sempra Energy) 
informed us that the company's dispute with Peru's tax 
authority, SUNAT, is fully resolved.  SUNAT determined that 
Luz del Sur owed 929,000 soles (approximately $282,000) in 
back taxes and interest through 1999.  The company gladly 
accepted the figure in light of the earlier $73 million tax 
liability.  SUNAT also agreed not to appeal the Tax Court 
decision that prevented the agency from reopening the 1996- 
97 tax years.  Only three of the original nine ATPDEA 
disputes -- Engelhard, Princeton Dover and LeTourneau -- 
remain.  End Summary. 
 
Luz del Sur Pleased With Result 
------------------------------- 
 
2.  (SBU) In 2001, Peru's tax agency, SUNAT, disputed Luz 
del Sur's use of accelerated depreciation to determine tax 
liability and argued that the company overvalued its assets 
to reduce its tax burden.  The issue initially went to both 
arbitration and a parallel Tax Court proceeding.  Luz del 
Sur won in both instances, but SUNAT was permitted to 
revisit the case.  In July 2003, SUNAT assessed Luz del Sur 
with $56 million in back taxes due in 1999 (a figure that 
grew to $73 million).  Luz del Sur again appealed the SUNAT 
assessment to the Tax Court, which ruled in February 2004 
that the company had a right to revalue its assets.  The Tax 
Court directed SUNAT to employ GOP agency CONATA (state- 
owned valuation firm) to conduct a new appraisal of Luz del 
Sur's assets. 
 
3.  (SBU) The Tax Court issued a ruling on July 26 that 
accepted the CONATA appraisal of the U.S. company's assets 
(Ref B).  The Tax Court then instructed SUNAT to use that 
valuation to determine any back taxes that Luz del Sur owed. 
Mile Cacic, General Manager of Luz del Sur, told EconCouns 
on September 26 that SUNAT issued its final assessment of 
back taxes owed by the company: 929,000 soles (approximately 
$282,000) of which 552,000 soles covered interest and 
penalties.  On a related issue, Peru's Commercial Dispute 
Coordinator Aurelio Loret de Mola informed us that SUNAT 
would not appeal a Tax Court ruling that prevented the tax 
agency from revisiting the 1996-97 tax years. 
 
Comment 
------- 
 
4.  (SBU) With the resolution of the Luz del Sur case, Peru 
now has three of the original nine ATPDEA cases to contend 
with -- Engelhard, Princeton Dover and LeTourneau.  In a 
positive development, the GOP prosecutor recommended 
dropping the two local Engelhard executives from the large 
criminal case involving gold suppliers and exporters.  To 
his disappointment, Princeton Dover's executive is likely to 
be included in the criminal case.  The Ambassador plans on 
meeting with Loret de Mola shortly to discuss strategies for 
resolving the remaining disputes. 
 
STRUBLE