Colombia’s new government wants to boost tax revenue to finance its ambitious agenda.
Less than 24 hours after President Gustavo Petro was sworn in, Finance Minister José Antonio Ocampo presented Congress a tax reform that seeks to boost tax revenue with $5.5 billion in 2023.
In 2026, the reform could increase tax revenue to $11 billion, according to Ocampo.
This implies that Colombia’s tax revenue would go from 13% of the country’s GDP, one of the lowest rates in Latin America, to 16%, the regional average.
How Petro wants to boost tax revenue
- Raise the income tax of the country’s top earners
- Introduce a progressive wealth tax
- Taxes on sugary drinks and plastics
- Raised taxes for the oil and mining sector
- Simplify tax system by eliminating exemptions
The tax reform primarily seeks to raise the revenue to finance the government’s pending budget proposal that would seek to combat unemployment and poverty.
This is necessary urgently after the coronavirus pandemic surged Colombia’s poverty rate to 35.7% last year, according to Ocampo.
The State has a historical social debt. Inequality levels have been high and persistent. The purpose of this project is to make progress in two main areas: to reduce inequitable exemptions and to obtain sufficient resources to finance the strengthening of the social security system.
Finance Minister Jose Antonio Ocampo
The taxes that target fossil fuels are part of Petro’s plan to make Colombia less dependent on the exports of fossil fuels and create jobs in other sectors.
The president was elected in June after promising that his economic policy would combat poverty and climate change.
After his election, Petro has been able to form a majority coalition, which would help the government push its tax reform through congress.
A tax reform proposed by former President Ivan Duque that also sought to increase tax revenue led to major anti-government protests in 2019 and last year.
