President Gustavo Petro’s tax reform proposal cleared its first hurdle yesterday after passing in the Senate with 63 votes for and 18 votes against. Some amendments were made to secure a consensus but the central aspects of the proposal stayed largely intact.
“This is the most progressive tax reform in history. Obviously some sectors will pay more taxes but those are all high income sectors, and we hope those resources contribute to Colombia’s social development,” Economy Minister José Antonio Ocampo said, vowing to use the money to finance social programs, in line with Mr. Petro’s redistributive campaign platform.
Experts believe the country could raise around 1.5 percent of GDP in new taxes, although Colombia is facing a delicate fiscal situation which could limit its spending capabilities.
The reform creates a new wealth tax targeting people with over COP 2.7 billion (USD 500,000) in assets, progressively increasing rates up to 1.5 percent of their fortunes yearly.
The energy and mining sector will also be taxed, with new levies adjusted in accordance with international price variations. This was a victory for Mr. Petro’s government after stiff resistance from the sector, which will become one of the central contributors to the reform.
Tax on individual income will also be raised for people earning more than COP 10 million (USD 2,000) per month, although pensions were kept out of the reform after a congressional amendment.
Revisions were also needed with regards to taxes on unhealthy products, exempting bread and some sweeteners, as well as adding a one-year transition period for the goods to be included on the list. The tax on churches, meanwhile, was rejected outright.
The fine print of the bill will be discussed once again in the House of Representatives, and turned into law if both proposals are identical. Otherwise, final approval will be required to make the final bill.