Tax: income for individuals and VAT for the entire family income basket

The Minister of Finance, Alberto Carrasquilla, recently stated in Dinero that the Tax Statute -ET- must be modified and that the country’s tax issues must begin to be discussed next year as part of the strategy to achieve economic recovery.

“Colombia must stop having a ‘poor country’ Tax Statute, since the rebound of the economy is consolidating. The rebound is already starting and it is clearly seen in the third quarter data; it was significant in the third quarter. We are far from what we would like, but it is clear that the economy has bottomed out and is in a process of recovery”, he explained.

Figures from the national government indicate that the rebound in GDP for next year would be 11%. In addition, it would go from a drop of 6.8% in 2020 to a rebound in the economy of 5% in 2021.

“The main adjustment mechanism that episodes of indebtedness have had is economic growth. The common thread is the economic recovery as a substantive element in this process and the fiscal dynamics can become a vicious circle,” said Carrasquilla.

Tax reform focused on income of individuals

As part of the economic recovery strategy is the idea of implementing a new tax reform, due to the increase in spending and the country’s debt this year due to COVID-19.

It is clear that discussions on this issue will take place next year, as it is one of the ways to counteract the debt and public spending, which would decrease if economic growth is consolidated.

On the above, Carrasquilla emphasized the income tax.

“The composition of our income tax is not even in relation to that of other Latin American countries, let alone emerging countries. We are far from the OECD territories,” he described.

In figures, in our country the income tax of natural persons is equivalent to 1.2 % of the income tax, while in emerging countries it is 3 % and in the OECD it is 8.3 %.

Tax articulated to be discussed in the second half of 2021

On the other hand, Fernando Quijano, director of La República, has stated that there is no way to continue getting into debt and to keep the tax reform at a distance.

“There is a group of international experts that in February will deliver the tax roadmap to see where we get the resources from”, he recalled in Semana.

He added:

“If we have the capacity to make a structural tax reform in times of pandemic? If we can mention raising the VAT? There are some hard things. We have to start talking about it. There is no way that on July 20 a tax article will not be filed to analyze it during the second semester of next year”, he emphasized.

Taxing high salaries

Among the ideas being discussed, one of the ideas of the former president of Anif, Sergio Clavijo, to tax the salaries of those who earn more than 3 million pesos in the country, is gaining strength.

“International figures indicate that salaries of 3 or 3.5 million pesos should be taxed at a rate of 1 %, this will not provide much revenue, but making people declare paying 1 % ensures that we give them a sense of belonging to take care of public money”, explains Clavijo.

This would be a step towards the desired 2% of the GDP, which is expected to be achieved with the tax reform.

Government would insist on taxing the entire family market basket

The Vice Minister of Finance, Juan Alberto Londoño, stated in several media that the next tax reform could include a point to establish a general VAT of 19% for all foodstuffs.

“It would seek to establish a general tax, causing many of the products to go up in price up to 14 %.”

Today, 60% of the family basket is taxed at different VAT rates: some foods have 19% and others 5%. The aim would be to establish a general tax, causing many of the products to go up in price by up to 14%.

“We have a number of products with VAT of 19%, which is the VAT that we should have general on food, although that is not the discussion we are having at the moment,” said Londoño.

If this initiative is approved, there would be revenues of 9 trillion pesos per year.

Source: Actualícese