Colombian President Gustavo Petro’s Attempt To Increase Withholding Tax Rate Faces Criticism Amidst Costly Foreign Spending

The Ministry of Finance has sparked national debate on April 14, following the release of a draft decree that proposes sweeping changes to the tax withholding system in Colombia. The initiative includes both an increase in withholding tax rates and a lowering of the minimum income threshold required for early tax collection, known as “retención en la fuente.”

The government’s aim is to boost state revenues in the short term, but the plan is already drawing criticism for its potential long-term consequences, as it may lead to long-term fiscal complications while shifting the burden onto future administrations.

According to La República, Colombian economic-financial newspaper, the reform is projected to generate between $1.6 million and $4.6 million USD, depending on implementation: Luis Fernando Mejía, director of economic think tank Fedesarrollo, estimates the change would effectively advance about 0.8% of the country’s GDP in 2026 taxes. He noted that this amount closely mirrors the tax reform proposal that failed in Congress in December 2024. The measure would impact numerous economic sectors, including coal extraction, which would face a hike from 3.2% to 5.5%, and oil, jumping from 5.6% to 7%.

The announcement triggered an immediate response from Representative Katherine Miranda (Congresswoman in the lower house of the Congress), who condemned the plan. She accused the government of irresponsibility, pointing to its spending abroad while proposing austerity at home.

“They’re spending more than $11 million USD on fake houses in Japan, $600 billion COP on a consultation to campaign and they want to defund the next government”, Miranda wrote on X following the announcement. Miranda’s comments echo those of Senator María Fernanda Cabal (Congresswoman in the upper house of the Congress), who earlier that day denounced what she called “wasteful and unaccountable” foreign expenditures under the guise of promoting Colombia, after the investment of $11,200,000 USD in a government-backed cultural and diplomatic space established by the Colombian Ministry of Foreign Affairs in Japan as part of the Expo 2025 Osaka

“Petro’s government spent more than $11 million USD on the ‘Casa Colombia’ in Osaka, Japan. It’s outrageous to see how they deny funding for medicines, housing subsidies, and education, yet they provide millions of dollars for a house in Osaka, Japan,” Cabal said in an X post.

According to Cabal, more expenditures with the same purpose were done for the ‘Casa Colombia’ initiative in Davos and Paris.

Laura Sarabia, Foreign Minister, visited Japan and inaugurated Colombia’s pavilion at the Expo 2025 Osaka, where Procolombia expect around 28 million visitors. Officials argued that the venue will help showcase Colombia’s global potential, but opposition voices remain unconvinced about the actual benefits.

In response to the complaints, President Petro defended the investment, also via X, pointing out that Colombia was the only Latin American country to participate in the event and that “the money invested in the stand can be regained in only one day through exports and tourism.”

Headline photo: The design, construction, and operation of Colombia’s pavilion at Expo 2025 Osaka cost more than $11 million USD (Photo from Colombia Expo 2025 Osaka official Twitter account @Colombiaexpo)