Yesterday Colombia’s Senate approved the Petro Administration’s tax reform bill, hoping to raise an additional 20 trillion COP ($4 billion USD) over the next four years to fund President Gustavo Petro’s ambitious social agenda, and shore up the country’s concerning fiscal deficits.
The new tax bill places export duties on coal by up to 10% and petroleum by up to 15% depending on commodity prices and raise taxes on Colombians earning more than $2,000 per month (10 million pesos, precisely). The law also removes the tax deductibility of petroleum royalties paid to the government by both coal miners and petroleum producers.
With petroleum and coal being Colombia’s most economically important exports, the shock drove the peso, already down 25% the past year, to a historically low $5,070 COP to the USD. Finance Minister José Ocampo complained that the markets were “overreacting,” while defending the package saying: “This is the most progressive reform in history! There are obviously some sectors which will pay more taxes, but all have high earnings.”
Dividends will be taxed at 15% and the wealth tax will be 0.5% on assets exceeding 3 billion pesos, 1% on assets over 5 billion pesos, and 1.5% on assets over 10 billion pesos.
A new 5% tax is imposed on digital streaming services such as Netflix and HBO Max with at least 300,000 subscribers in Colombia. This is not restricted to video, but also applies to audio streaming and web portals.
The Senate bill must go through a reconciliation process with the house bill before the president signs the final version.
The Petro administration sought to impose a 20% tax on churches, but that measure did not pass congress in the heavily Catholic country. Colombia already has a Value Added Tax (VAT, or IVA in Spanish) Taxes were also rejected on bread, sandwiches, crackers, honey, milk and yogurt, but will be placed on the following foods:
- Other dairy products besides milk and yogurt
- Sausages, meat, offal, insect-based food (ants are a famous snack with some Colombians)
- Prepared or preserved meats
- Confectionery items
- Chocolate, basic and prepared
- Baking and pastry mixes
- Pastries and bakery products
- Jams, marmalades, and jellies
- Ice cream
Above photo: Colombia’s taxation chief Luís Carlos Reyes (left) & Finance Minister José Ocampo in congressional chambers (photo: Twitter account of President Gustavo Petro)