After two failed attempts, the Colombian Congress approved Duque’s tax reform

After two attempts frustrated by the massive protests that broke out in April, the Colombian government got Congress to approve, in an express process, a new tax reform that will allow the State to raise more than four billion dollars. Unlike previous projects, which charged the working classes with more taxes, this initiative includes social assistance programs aimed especially at families affected by the pandemic. It also proposes to attend the companies that were affected by several days of national strike. However, the Colombian opposition believes that the reform is far from designing a long-term sustainable economic project. It was not contemplated, for instance, the wealth tax and the tax exemptions granted to multinationals persist. “Today this project is approved that does not touch the highest assets and income at all, but rather makes up the tax system to carry out maintenance tasks to the serious situation of poverty that the country is going through “, highlights Page 12 the senator of the Alianza Verde party, Ivan Marulanda.

The keys to tax reform

The two Chambers of the Colombian Congress approved the tax package by a large majority with which the government of Iván Duque hopes to stabilize public finances and sustain social programs at a delicate time due to the covid-19 pandemic. With 132 votes in favor and 22 against, the conciliation text of the reform project ended up being approved this Thursday by the plenary session of the House of Representatives. Now it was left to the president to finally become law.

One of the main aspects of the tax reform is the increase in business tax, which went from 30 to 35 percent. “The problem is that It does not differentiate large, small and medium-sized companies, but applies the same tax to all, with which most of the collection will be made by the contributions made by small and medium-sized companies “, highlights the director of the Center for Labor Studies (Cedetrabajo), Enrique Daza, who adds that it is another reform “against the middle class and national businessmen and for the benefit of large multinationals.”

For Daza, the reform does not touch “the critical elements of a tax structure such as the inheritance tax, dividends and large fortunes, and maintains the tax exemptions that have been granted in 2019 under this same government to mining, financial and tourism companies who are the great beneficiaries of the system ”.

For his part Marulanda warns that no firm progress was made on tax evasion, a sensitive point in the Colombian economy. “We have a totally cumbersome, indecipherable tax system, and all of this has a reason for being. Between the meanders of that legal complexity, all kinds of tax evasions are made. In fact, the State itself, through the National Tax and Customs Directorate, estimates that tax fraud in Colombia is equivalent, more or less, to five points of GDP“, remarks the senator from Alianza Verde.

The tax on sugary drinks, an issue that was part of an extensive civil awareness campaign, it was also not included in the bill. According to the latest Quality of Life Survey of the National Administrative Department of Statistics (DANE), more than 70 percent of Colombians older than two years consume sugary drinks in departments such as Magdalena, Bolívar or Sucre. These beverages are associated with a high risk of presenting diseases such as hypertension and type 2 diabetes, and the healthy taxes sought precisely to discourage consumption by increasing their sale price.

No debate

On Tuesday, during the vote in the Senate, the opposition congressmen withdrew from the precinct, considering that the reform was not debated properly: the project presentation was filed on Monday afternoon and the debate was scheduled for eight in the morning on Tuesday. For Senator Marulanda, it is necessary to take into account “the right of citizens to know, with the most absolute transparency, among which alternatives the country’s tax system is being defined.”

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“The government presents the project, the Chambers in their economic commissions appoint some speakers and those speakers meet privately with the Minister of Finance and the government team, and there they define the profiles of the reform. Then congressmen who make the final decision are given three minutes each to speak. In these conditions there is not really a debate “, questions the presidential candidate.

Marulanda, who participated as a constitutionalist in the current Magna Carta of Colombia in 1991, believes that the current tax reform project was presented late since it should have been presented a year and a half ago, when the pandemic began to develop.

With the coronavirus in the background, Monetary poverty in Colombia rose 6.8 points last year compared to 2019 and already stands at 42 percent, according to DANE. In addition, unemployment is close to 20 percent in large cities, and in the case of young people it rises to almost 30 percent. “All this has happened with a state with its arms crossed, without intervening, arguing that it has no resources”, Marulanda remarks.

The (failed) previous reform

The tax reform had been the trigger for the mobilizations after April 28 in Colombia, in which more than 60 people died and thousands were injured, according to the Ombudsman’s Office. Popular pressure led to the project being withdrawn by Duque and the Minister of Finance, Alberto Carrasquilla, to resign.

The initiative promoted by Carrasquilla established a VAT of 19 percent for public services of electricity, water and gas, in addition to the elimination of the exemption of this tax on basic foods. However, the reform, still reformulated, was never debated in Congress. “It was defeated and after a time and large mobilizations the government presented this new project. It is less ambitious and equally regressive, because it maintains the tax structure that was already based on indirect taxes“, raises Daza, who is also a spokesperson for the Tax Justice organization.

In tune, Marulanda assures that Colombia has a tax system that does not distribute wealth or income. “The country has been doing a reform every 20 months in the last 25 years, but the GINI coefficient has not changed, that is, the reforms do not affect income distribution at all. This system has led us to have the most unequal economy of the Americas, Latin America being the most unequal region in the world“laments the green senator.

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