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Colombian lawmakers will present a tax reform proposal today to raise at least $ 3.97 billion for Bogota’s treasury. Colombian
Colombian lawmakers will present a tax reform proposal today to raise at least $ 3.97 billion for Bogota’s treasury.
The government of Colombian President Ivan Duque has already ruled, and failed, adopt far-reaching tax reforms. Previous reform legislation led to nationwide protests and riots, with the opposition claiming that Colombia’s endemic economic inequality—the second worst in South America, would only be exacerbated by the reforms proposed by Duque. The riots, combined with the deterioration of public finances, the increase in public debt and the large budget deficits of the past two years have led Fitch and S&P to downgrade Bogota’s sovereign debt to the “undesirable” status.
Protests against previous tax reform legislation turned into continued violent exchanges with the government, leading officials to moderate reform proposals. By deflecting the message of tax increases, Duque’s government seeks to strengthen enforcement of tax collection, tackle tax evasion, increase corporate taxes and reduce public spending. If this bill passes, Bogota’s credit rating will not be raised, but the budget deficit forecast this year of 8.6% of GDP will be reduced to 7% next year and the country will be well positioned for adopt further economic reform measures in 2022.