Colombia seeks to raise $3.6 bln in new tax reform, new minister says

Colombia will seek to raise 14 trillion pesos ($3.6 billion) with new tax reform, its freshly-appointed finance minister said, after mass protests and lawmakers opposition forced the withdrawal of the previous bill and his predecessor's resignation. In an interview late on Wednesday, Jose Manuel Restrepo, who until Tuesday was commerce minister, said the proposed temporary and permanent taxes would ensure the continuity of social programs and financial stability.

Colombia will seek to raise 14 trillion pesos ($3.6 billion) with new tax reform, its freshly-appointed finance minister said, after mass protests and lawmakers opposition forced the withdrawal of the previous bill and his predecessor's resignation.

In an interview late on Wednesday, Jose Manuel Restrepo, who until Tuesday was commerce minister, said the proposed temporary and permanent taxes would ensure the continuity of social programs and financial stability. Protesters at the week-long anti-government demonstrations have broadened their demands to include action on poverty, police violence and inequalities in the health and education systems.

Twenty-four people, mostly demonstrators, have died. "It could be along the lines of some 14 trillion pesos, which would include permanent and temporary resources and which would also have temporary and permanent spending - the temporary ones very much associated with the social difficulties of the pandemic's impact," Restrepo said.

Financial markets generally expect that the government will have to settle for raising less money than the 23.4 trillion pesos the previous bill was expected to bring in. The new proposal abandons unpopular sales tax increases and the scrapping of some deductions and will focus on temporary income tax surcharges on businesses and wealthy individuals, the temporary extension of wealth taxes, an increase in dividend duties, and cuts in spending.

"We are conscious that we also have to make austerity efforts in public spending in such a way that, together with the fiscal resources that we hope to raise, we can effectively contribute to fiscal balance and also to social spending, which is so important," Restrepo said. The reform would come into force in 2022 and most of the revenues would be raised the following year, he added.

"This is very important: social programs would have attention from now," Restrepo said. "We already have covered what we have committed for this year." He emphasized that the proposed business and high-income surcharges would be temporary, and said companies had shown themselves willing to contribute.

"The business sector is the first to act in solidarity," he said. "We could also consider some additional contribution by individuals, but that cannot mean that anyone who today is not paying taxes would have to pay them." Restrepo said he had spoken to ratings agencies - which the government has repeatedly warned may take away Colombia's investment-grade rating unless fiscal reforms are enacted.

He said he was confident the bill could pass before the end of the legislative session in June, though it will depend on achieving consensus. "We have discussed this with the president and some ratings agencies, in the sense that the essential thing is to build (the reform) with constructive dialogue," he said.

"First, we have to define who we can and should help - the vulnerable sectors; second, what are the funding sources; and third, in concert with Congress, advance this bill as best we can."

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