Colombia - Attention: President Duque orders the withdrawal of the tax reform project

Faced with the critical public order situation in the country and four days of continuous protests, the president decided to withdraw the tax reform bill from Congress. The lack of political consensus and the annoyance in the streets led the Government to make this decision.

The President of the Republic, Iván Duque, announced this Sunday that he asked Congress to withdraw the tax reform filed on April 15 and work on the text of another reform that could stabilize the country's accounts.

"I ask the Congress of the Republic to withdraw the project filed by the Ministry of Finance and urgently process a new project as a result of consensus and thus avoid financial uncertainty," said Duque.

The president reiterated that the reform is necessary to stabilize the accounts, give peace of mind to international markets and expand aid to the vulnerable population.

“The reform is not a whim, it is a necessity. To withdraw it or not, it was not the discussion, the real discussion is to be able to guarantee the continuity of social programs ”, said the president.

The uncertainty about the future of the tax reform, which initially sought to raise more than $ 30 billion and ultimately had a goal close to $ 23 billion, caused investor confidence in Colombia to be affected in recent days, causing interest rates on the country's debt bonds rose and the peso depreciated in relation to the United States dollar.

At the local level, the market is attentive to what happens with the reform, as the president's decision only generates more uncertainty about the future of the country's financial stability.

“I think that since the Government insists on the reform, the markets will continue the same. I mean, nervous but waiting for something to be approved in the end. Once the reform is withdrawn, it is important to have a broader coalition to approve the new project ”, said the director of Economic Investigations of Corficolombiana, José Ignacio López.

Now we will have to wait for the construction of the new bill, which, it is still unknown, if it will be filed in Congress before the end of the first half of the year. Sources from the Ministry of Finance told this medium that the new project will be the presentation in which the Government had been working with the congressmen.

How will the new reform come?
President Duque revealed this Sunday some of the points with which there is an agreement between the Government, businessmen and politicians to include in the next bill.

Some of the initiatives that would go into the next bill, which Duque asked to process quickly, are the following:

• Temporary income surcharge to companies
• Extend the temporary estate tax
• Increase the tax on dividends temporarily
• Implement an income surcharge for people with higher incomes
• Deepening the State's austerity programs

Similarly, it is expected that the new tax reform will continue to maintain the expansion of different social programs such as Solidarity Income, VAT compensation and the Formal Employment Support Program (Paef).

"The principle is that those with the highest incomes contribute in solidarity with the most vulnerable," said Duque.

There will be no more VAT or more liable for income tax
The president also said that, in the new reform, the controversial proposals that sought to extend VAT and income tax to natural persons will not be included.

“There will be no VAT increase for goods and services nor will the existing rules be changed. It is clear that no one who does not pay income tax will pay that tribute, ”said Duque.

It is worth mentioning that one of the pillars of the reform that had been filed was the elimination of goods exempt from VAT, a recommendation made by the Commission of Tax Experts, who also recommended that more natural persons have to pay income tax in Colombia. .

Once the new project is known, it will be known what the estimates of the collection will be and how the income distribution of the new reform will be.