BOGOTA: Colombia’s richest citizens face a tripling in the top rate of wealth tax, as well as higher levies on salaries and luxury goods, as the leftist government of Gustavo Petro taps them to narrow the widest fiscal deficit since the pandemic.
The finance ministry is seeking to raise revenue by 26.3 trillion pesos in one of the most ambitious attempts to boost revenue in recent years, in a tax bill sent to congress yesterday.
The bill proposes an increase on the top wealth tax rate to 5%, from 1.5%, and would also slash the threshold at which it becomes payable to two billion pesos from 3.6 billion pesos.
It raises the top marginal rate of income tax on individuals to 41% from 39%, and would also boost the tax on cars and luxury goods.
The bill would also introduce a new 1% tax on oil and coal extraction, and proposes a 30% tax on dividends received by non-residents.
It proposes that companies in the financial sector including brokerages, insurance companies, among others pay a corporate tax rate of 50%.
A 19% tax on online gambling, one of the fastest-growing sectors of the economy, is also included.
Petro’s administration is grappling with a widening fiscal gap after fiscal revenues fell short of expectations.
The imbalance led the government to suspend its spending limits for the next three years, which triggered two credit rating downgrades in June.
The increase in the wealth tax, the increase in taxes on the financial sector to 50% and the surcharges on mining and energy sector would all tend to discourage investment, said Luis Fernando Mejia, head of the Bogota-based think tank Fedesarrollo.
“None of this seems appropriate in the context of an economy with its lowest investment rate in two decades,” Mejia said, in response to written questions.
Jorge Restrepo, an economics professor at Javeriana University in Bogota, described the bill as “extremist”, and said it would generate a “fiscal shock of great magnitude” for the economy.
However, it’s unlikely that congress will approve it in its current form.
The new tax on oil could further weaken investment in exploration and output, said Sergio Cabrales, a professor at Bogota’s Los Andes University. — Bloomberg
