Colombian government sends $ 6.4 billion tax reform plan to Congress

BOGOTA, April 15 (Reuters) – The Colombian government officially proposed to Congress a $ 6.4 billion tax reform on Thursday that would eliminate many deductions and increase rights for individuals and businesses.

The measure, seen as essential by financial markets and analysts to manage fiscal pressures caused by the coronavirus pandemic and maintain the country’s credit rating, aims to increase tax collection by 23.4 trillion pesos (6.38 billion dollars) per year, equivalent to 2% of gross domestic product. .

“It is a moderate reform if we compare it at the international level”, declared the Minister of Finance Alberto Carrasquilla during a virtual presentation.

Some provisions of the reform package, which would largely come into effect from 2022, have already been criticized by opposition lawmakers. He will face a difficult path to approval a year before the presidential and legislative elections.

The funds raised by the plan would be used to fill spending gaps, social programs and economic rejuvenation.

Changes in the law would result in an additional levy of 7.3 trillion pesos on value added tax (VAT), 17 trillion on individuals and 3.7 trillion on businesses. It would also increase dividend taxes from 10% to 15%.

It would extend a carbon tax to all fossil fuels and raise 14 billion pesos through a tax on single-use plastics.

Colombia’s budget deficit widened to 7.8% of gross domestic product last year, and the country increased its debt to the equivalent of 64.8% of GDP to meet coronavirus-related needs, so even that the economy shrank by 6.8% and tax collection declined.

The government has predicted a budget deficit of around $ 26 billion this year, equivalent to 8.6% of GDP, and economic growth of 5%.

Colombia’s annual tax income is equivalent to 19.3% of its $ 274 billion GDP, while tax deductions are equivalent to around 6.5% of GDP.

Credit rating agencies have said they will revise the country’s rating if the reform proposal is approved.

$ 1 = 3 665.49 Colombian pesos Reporting by Carlos Vargas and Nelson Bocanegra; Written by Julia Symmes Cobb; Editing by Peter Cooney

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