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Petro seeks to raise taxes on the richest in Colombia

Petro busca subir impuestos a los más ricos de Colombia

Colombian President Gustavo Petro proposed raising taxes on the richest in Colombia as part of an ambitious fiscal reform project, his first major legislative proposal with which he hopes to obtain sufficient resources to meet his promises, including the fight against poverty.

The reform includes a reduction of tax benefits for the richest, taxes for the mining and oil sector and fight against tax evasion. Furthermore, it proposes the creation of a permanent wealth tax or to wealth for people who have assets of more than 3,000 million pesos (690,000 dollars), at a rate that starts at 0.5% and reaches 1% for assets of 5,000 million pesos (1.1 million dollars) onwards.

The bill proposes to increase from 10% to 20% the income tax rate corresponding to dividends or shares received by foreign companies without their main domicile in Colombia.

This is the first reform to be announced after the Petro’s swearing-in with which you wait collect revenues of 25 billion pesos by 2023, equivalent to 5,760 million dollars. However, the government hopes that the collection will increase progressively -along with the decrease in evasion- and at the end of the Petro mandate in 2026 the annual collection will be 50 billion pesos per year, that is, 11,590 million dollars.

Said progressive collection would also depend on the economic growth of the country. “When the economy grows, in turn, individual incomes begin to grow,” Isidro Hernández, a research professor at the Externado University School of Economics, told The Associated Press.

For the amount to be raised, it is more ambitious than the one carried out in 2021 the government of former president Iván Duque (2018-2022) who had to completely change his initial proposal after massive demonstrations against higher tax collection that, according to the dissidents, affected the pockets of the middle class and the most vulnerable. Duque managed to get a collection of 15.2 billion pesos approved.

Petro begins his mandate with the majorities in Congress, made up of the left-wing caucus and traditional parties that joined his coalition. The tax reform will be the first measure of the solidity of the majority of it.

The day before, Petro said in his inauguration speech that it is an act of solidarity, in which those who have more resources would pay more taxes while the State directs them towards the most vulnerable.

The reform will increase the collection of income from natural persons by eliminating some exemptions. “Our goal is to make people over 10 million pay of monthly income (2,300 dollars) that are the 2% of the population with the highest income”, explained to the press the Minister of Finance, José Antonio Ocampo.

The ministry assured in a statement that people who receive income of less than 2,300 dollars per month will not have variations in their income tax, which already existed for those who obtain annual income of more than 11,500 dollars, that is, who monthly receive income of approximately $966.

However, the payments they make depend on deductions and exempt income, this would be the change that people with higher incomes would have: the value to pay would rise when tax benefits are limited.

From the wealthiest layer of society, there are those who would contribute a higher rate to the income and wealth tax, or only to one of the two, depending on the income of each person, Hernández explained.

The project seeks to impose a new tax burden on oil and mining exports that exceed a certain threshold. The tax will be 4.6% for oil, 7.6% for coal and 7.8% for gold. The minister considers that the three sectors are benefiting from “extremely high international prices” and his contribution would help finance social spending.

Hernández assured that it is a new tax for the energy mining sector that is in accordance with the new government’s idea of ​​accelerating the energy transition and discouraging the extractivist model.

Other preferential tax benefits would also be eliminated, such as gasoline prices in border areas, since they would be generating more contraband from Colombia to Venezuela, according to Ocampo.

The proposal includes new taxes on sugary drinks and ultra-processed food products, in order for consumers to change to healthier habits, according to Ocampo. As well as taxing the sale and import of plastic products used for packaging and packaging only once to discourage their production and use.

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