Bogota, Jul 14 (FN Bureau) The Colombian government has released a new draft tax reform that involves spending 15 billion pesos ($3.9 billion) on new social welfare, 60% of which will be borne by businesses, Colombian President Ivan Duque said. “Today we present the consensus of the Social Investment project with an unprecedented austerity and anti-evasion plan. In addition to the solidarity support of the business sector, we will benefit millions of Colombians, we will promote reactivation and stabilize public finances,” Duque said at the bill’s presentation on Tuesday.
Tax reform was one of the main motives of nationwide demonstrations that swept Colombia in late April. The original draft entailed filling the post-pandemic budget gap at the expense of citizens by increasing VAT and other fees. The new reform, called the Social Investment Project, is aimed at supporting the most vulnerable segments of the population of about 11.6 million. It is assumed that the level of poverty in the country can be reduced from the current 42.5% to 34.2% through the proposed social programs, worth 15 billion pesos ($3.9 billion). “We are committed to austerity in government spending and tackling tax evasion through new instruments that will make up 40% of the initiative,” Finance Minister Jose Manuel Restrepo said during the presentation.
The remaining 60% of social spending will come from additional levies in the financial sector, lower income tax incentives, higher rents for companies, and “tax normalization.” Restrepo said that the new tax reform is aimed at supporting young people, for whom job opportunities will be created. “The most recurrent message in the conversation with young people from all regions was the need to create job opportunities for this group of people. As for entrepreneurs, they are committed to contributing higher taxes to finance social investment,” Restrepo added. President Duque called the reform project a “common victory,” but the opposition has questioned its sustainability, saying that given the growth in social spending, it is not clear how the budget deficit — which was the reason for reforming the tax system in the first place — will be financed.