Tax reform: what proposals will the government accept?

Andi, Fenalco and the Consejo Gremial Nacional agree to suspend the discount of the industry and commerce tax, which by 2022 would be 100%. The Government would not look favorably on eliminating the special income tax rates for free zones and broadening the base of those responsible for the wealth tax.

“The tax reform can no longer be structural, but must solve the urgent problems of the fiscal deficit”, they point out. In addition, it cannot be as ambitious as it was initially, but must be subject to a collection between 7 and 14 trillion pesos. For analysts, with a figure of around 14 trillion pesos the urgent need for resources could be solved, thus honoring the promise of not imposing more tax burden on the middle class.

In addition to seeking permanent revenues, in addition to transitory expenses, it is necessary to finance the State and reduce some recurrent costs that are not totally necessary. “A policy of austerity must be applied,” they say.

Key points and initiatives unveiled by the Government

President Iván Duque continues to shed light on what the new tax reform may include.

“establish a higher taxation on the 1% of people with more resources and be able to finance social programs”.

The idea is that the bill includes proposals from the Andi and the Trade Council to establish a higher taxation to 1% of the people with more resources and to be able to finance social programs, effective until next year.

Likewise, to postpone the tax benefits contained in the 2019 tax reform, as well as to include a wealth tax and apply more taxes to the highest income earners.

On multiple occasions the Government has said that the pockets of the poorest and most vulnerable families and the middle class will not be touched. Thus, among the proposals to be presented next July 20 are:

– Temporary incomesurtaxon companies income tax.

– Temporaryextension ofthe wealth tax.

–Increasethe tax on dividends temporarily.

–Createan income surtax for higher income individuals.

– There will benoVAT increase for goods and services.

– Income tax for individuals willnotbe affected.

Compilation of proposals

The following table, prepared by the research team of Mazars Colombia, shows the proposals of the Andi, Fenalco, Anif, the universities and the National Trade Council.

Good proposals that could remain on hold

For the analysts of Mazars Colombia, the tax reform bill already withdrawn by the national government contained positive aspects that could be at risk with the new proposal.

“For example, the orange economy, the Duque Government’s flag. Incentives for technological value-added industries and creative activities”, they state. “Will the development of the Colombian countryside be sacrificed to increase revenue to finance the crisis?”, they add. For them, Colombia, due to its geographical location, is key for the development of this type of projects. Currently, there is a lot of direct foreign investment in this type of projects.

Likewise, the prices of VIS and VIP housing could increase, since the profit on the sale of the land where these projects are to be developed would be taxed.

Source: Actualícese