Tax proposal: review of benefits

The consequences of taxing the entire family basket with VAT would be negative for the most needy population.

It is necessary to review tax benefits through a proportionality test, eliminate those that do not have a progressive impact and create a new tax on digital services.

The Centro de Pensamiento de Política of the Universidad Nacional de Colombia, the Centro Externadista de Estudios Fiscales, the Observatorio de Hacienda Pública y Derecho Tributario of the Universidad del Rosario, Dejusticia, Cedetrabajo, the Friedrich Ebert Stiftung in Colombia, the Observatorio Fiscal of the Pontificia Universidad Javeriana and the Master in Taxation of the Universidad de los Andes, entities gathered in the Red de Trabajo Fiscal, presented a series of proposals for the discussion of the next tax reform.

In general terms, the proposals include the following:

–Createa tax on the consumption of sugary beverages.

– Greentaxes.

– Proportionalitytestthat would evaluate the adequacy of tax benefits.

–Taxon digital platforms.

–Raisethe property tax rate.

–Evaluateproposals to move to a universal income tax return for individuals, where income and wealth thresholds are lowered.

The VAT debate for the entire family basket.

The entity is not in favor of charging VAT on the products of the family basket, since the consequences for the most needy population would be negative.

From its point of view, in addition, the national government has shown that it does not have the technical capacity to make an effective VAT refund that reaches the entire poor population.

“Currently, the VAT refund system only includes a certain prioritized population within Colombia Mayor and Familias en Acción, which represents one million households. These programs leave out the poorest population to the extent that, according to DANE data, households in extreme poverty represent about 4 million, while those in poverty amount to 13 million”, indicates the Network.

“The Government has other alternatives to compensate for the revenue lost by not taxing the family basket with VAT and to correct the regressive nature of the VAT tax benefits”.

For the entity, the Government has other alternatives to compensate for the revenue lost by not taxing the VAT on the family basket and to correct the regressivity of the VAT tax benefits. For example, to create a surtax that is calculated based on the consumption expenses of the family basket of the most favored households and that is collected through the income tax return.

What is proposed is to seek a VAT rate that takes into account income inequality, which could bring 10 trillion pesos per year to the Nation.

What is the proportionality test that would evaluate the adequacy of tax benefits?

For the Network, tax exemptions in the country should be reviewed and a proportionality test should be created by the Budgetary Technical Assistance Office -OATP- for the approval of tax benefits.

Regarding the above, figures from the Dian show that tax exemptions cost Colombia more than 80 billion pesos a year and the bulk of these exemptions are linked to VAT.

For this reason, the Network sees the need to review the existing benefits to eliminate those that do not pass the proportionality test, which will evaluate the need for the tax and its impact on the principles of progressivity and equity of the system.

The Network puts the magnifying glass on other taxes. Let’s see:

Tax on sugar-sweetened beverages.

It is proposed to create a surtax on the consumption of sugar-sweetened beverages of territorial scope, so that its collection is used to improve public health. This tax could raise more than one billion pesos.

In this regard, the Network indicates that “the WHO recommendations consist of regulating the consumption of sugar-sweetened beverages through taxes in such a way that the impact on the price exceeds 20%. According to several studies, a simple tax on sugar-sweetened beverages at a rate of 24% could reduce obesity in lower-income households by 5% to 10% and in middle-income households by 5% to 8%”.

Green taxes

Around green taxes, the idea put forward by the Network is to broaden the generating fact of the CO2 emissions tax, to progressively increase the rate of this tax and that the carbon price has no upper limit.

“In its first year of implementation this tax collected $476.9 billion, but it has stopped taxing CO2 emissions from natural gas and C18, so the tax’s generating fact could be expanded to include these emissions and, consequently, increase its collection.”

Tax on digital platforms

Another proposal is to create a new tax that taxes digital services, when the beneficiary of the service is in Colombian territory, which should be constituted with a low rate, taking into account that it is not a deductible tax.

Source: Actualícese