World news

Colombia passes ambitious tax reform to tax the richest

It’s a campaign promise come true in Colombia. On Wednesday, December 14, President Gustavo Petro promulgated his major tax reform, supposed to bring in 20,000 billion pesos to the state, or around 4 billion euros. The left-wing president, elected in June, had made the adoption of this reform, essential to the financing of his social program, the priority of his start in office.

The Colombian Head of State welcomed a “reform that allows for an increase in social spending” whereas, “until now, no tax reform has reduced the inequalities of Colombian society”. The new law plans in particular to tax more the oil and mining sectors, sugary drinks, ultra-processed food products or even corporate dividends. Above all, it taxes the richest more heavily – those whose monthly income is ten times higher than the minimum wage – as well as the high net worth.

Tax the richest

“This law faithfully reflects the philosophy of the Petro government, which wishes to establish a fairer, progressive tax system capable of financing a program of social justice”, analyzes Henry Amorocho, professor of economics specializing in public finance at the University of Rosario in Bogota. In Colombia, 12% of the population lives below the extreme poverty line, established at 161,099 pesos per month (around €32). Attacking the wallets of the richest is like a small revolution: with tax revenues equivalent to 13% of its GDP, Colombia is one of the Latin American countries that tax their citizens the least, according to the OECD.

The adoption of the text also constitutes an important political victory for Gustavo Petro, whose majority is based on the alliance between left-wing parties loyal to his policy and liberal parties further removed from his ideals. “The development of a new tax reform always generates a lot of divisions within Parliament, recalls Yann Basset, professor of political science at the University of Rosario. This heterogeneous majority resisted. Petro played his most important card from the start, to take advantage of a majority formed in order to pass this particular law. »

A successful political test

The Liberal Party, which even has more deputies in the House of Representatives than the historic Pact, the presidential party, did not hesitate to impose its “red lines” on the rest of the majority. Important measures such as the taxation of churches on their business income or the taxation of high pensions have been eliminated.

“There is always a hidden price during these negotiationsadds Yann Basset. The rallying of the centrist parties and the Conservative Party was acquired in exchange for appointments to ministries and administrations. »

Still, the adoption of the tax reform should allow Gustavo Petro to implement its major projects planned for next year, such as pension reform or that of the health system. The question of the financing of these projects seems to have been evacuated. That of the solidity of its majority, essential for their approval, will come back tirelessly.


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