Last Wednesday, hundreds of thousands of Colombians took to the streets to protest the tax reform package presented by Colombian President Ivan Duque and his finance minister Alberto Carrasquilla. While Colombia has suspended its fiscal rule requiring a mostly balanced budget, using the COVID pandemic as justification, the deficits and debt levels are unsustainable without additional revenues, or drastic cuts in government spending.
The tax package seeks to require new sectors of Colombians to pay income tax, starting with those earning as low as $2.400,000 COP per month, or $673 per month next year, and then $1,700,000 COP (Colombian Pesos) in 2023. Colombian minimum wage is currently approximately $250 USD per month. Currently, Colombians who earn approximately $1,000 USD and above must pay income tax, those below are exempt.
The fiscal package also would require tighter fiscal tracking on revenues, and add Colombia’s 19% value added tax to utility services: Electricity, water, sewer and gas, for consumers in properties that are zoned “social strata 4,5,6” in Colombia’s residential social strata zoning system that rates dwellings from 1-6 based on property appraisal.
The mammoth tax package also would raise the wealth tax on millionaires, taxing up to 2% of an individual’s net worth annually, a tax hike on workers earning more than $10 million COP monthly ($2760 USD), establish a tax on plastic packaging, and increasing the tax on gasoline and diesel fuel from 5% to 19%. It would tax internet connections for consumers in social strata 3 (lower middle income), tax computers and mobile devices while Colombia struggles to connect lower income students to the internet, and promote digital literacy, and tax funeral & cremation services, making such necessities almost 20% more expensive while Colombia’s health system is breaking under the COVID Pandemic.
Firearms and heavy weapons remain exempt from taxation, along with bottled mineral water and most soft drinks. In a “Let them eat cake” moment, Duque’s finance minister Alberto Carrasquilla in an interview defending the tax package, admitted that he had no idea how much basic staples like rice or eggs cost. “On the issue of eggs, it depends on its quality. Let’s say $1,800 COP (48 cents, US) a dozen or something like that.” A dozen eggs in Colombia costs an average of approximately $8,000 COP ($2.20 USD), though that price may fluctuate widely based on grade, packaging and purchase channel.
This led to intense ridicule of the finance minister, the unpopular president, and the presented tax reform package, painted as being designed by incompetent elites with no connection to the reality of average Colombians. The protests along with an almost unanimously negative reception of the package outside President Duque’s own party will certainly leave the Centro Democratico party of President Duque, Minister Carrasquilla, and their political patron, senator and former President Alvaro Uribe, severely damaged and lacking credibility heading into next year’s presidential elections.
Uribe’s party has yet to choose a candidate, but a movement within the party has emerged promoting former President Uribe’s son, Tomas Uribe. It is hard to imagine Uribe gaining much support outside his father’s political party. Colombia has never elected a radical leftist candidate, but some worry (while others hope) that 2022 may be the year of former revolutionary and current Senator Gustavo Petro. Petro had been a member of the violent revolutionary group M-19 in the 1980s, but more recently, Mayor of Bogotá from 2012-2015, with his term briefly interrupted as he was removed from office in December 2013 for alleged illegal decrees and mismanagement.
Above photo: Twittter @Giovasummer