By Luis Jaime Acosta and Nelson Bocanegra
BOGOTÁ, Apr 30 (Reuters) – Colombia will modify a tax reform bill, collecting proposals from various sectors, but will not withdraw it from Congress because it is necessary and cannot be postponed to stabilize public finances and maintain social assistance programs, announced on Friday the President Iván Duque.
The reform to increase taxes on individuals and companies, eliminate tax exemptions and deductions, was filed in Congress in mid-April despite the rejection of political parties and unions.
“In terms of VAT there will not be, among others, additional VAT or increases in VAT on products and services, that the basic family basket of Colombians will not be touched, that there will be no VAT on public services, that there will be no VAT on gasoline, “Duque said on his daily television program Prevention and Action.
“People who do not pay income tax today are not going to pay it, that is, the income tax base will not be expanded,” added the president.
Earlier, the Minister of the Interior, Daniel Palacios, said that, despite the search for a consensus with the political parties, the Government will not withdraw the reform project from Congress because it is necessary and cannot be postponed to stabilize public finances and maintain programs of social assistance.
“The National Government and the President of the Republic do not consider that there are red lines. We will work hand in hand with the political parties of the different sectors of the country to seek an agreement that is reflected in a new presentation, with a new text,” he said. Palacios in an interview with Reuters.
REJECTION OF POLITICAL PARTIES
The Government this week reduced the additional amount it seeks to collect with the reform, which would come into effect in 2022, to between 18 billion and 20 billion pesos annually (4.848 million and 5.386 million dollars) from an initial figure of 23.4 billion. of pesos.
Duque’s government does not have a strong or large majority in Congress, and his own party, the right-wing Democratic Center, criticized initiatives to impose taxes on food, public services and pensions.
Other parties that support the government also rejected those proposals, as did the independents Liberal and Cambio Radical.
The left-wing parties announced that they will vote against the reform project, believing that it will drown the middle class.
The Government maintains that the resources obtained with the reform would be destined to cover the fiscal deficit and to finance social programs, economic reactivation and the promotion of employment.
Last year Colombia raised its fiscal deficit to 7.8% of Gross Domestic Product (GDP) and increased debt to 64.8% of GDP, due to the crisis derived from the COVID-19 pandemic and to meet the needs in health and social assistance. At the same time, tax collection decreased due to the recession.
Risk rating agencies recently announced that a review of the country’s credit ratings – which maintains investment grade, although with a negative outlook – will be carried out after the final reform is known.
(Report by Luis Jaime Acosta and Nelson Bocanegra.)