Insights | Consensus, key to Tax Reform

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Consensus, key to Tax Reform

In what was described as a historical event, and which reflects the political consensus around the project, on August 25, the economic commissions of the Congress of the Republic approved in a first debate and in a single session the “Social Investment Law” (Tax reform).

Congressmen voted for 61 articles, including those that were eliminated in the presentation for the first debate against the original project, and approved the articles issued by the Ministry of Finance and the coordinators and speakers of the initiative.

“Congress has more than shown what this policy means, the purpose of contributing to the public good of society,” said the Minister of Finance, José Manuel Restrepo, at the end of the session.

Judging by what happened during the first debate in the joint economic commissions, this project – fundamental for the National Government – will be approved without major setbacks and no substantive modifications in the debates that will take place in the plenary sessions of the Senate and Chamber as of next September 9.

In this sense, it is important to point out that the National Government will continue to bet on consensus as a formula to ensure that the bill is approved without major trauma in Congress. And it is that since he came to office, with the great challenge of presenting a new Tax Reform project in the face of the failure of Alberto Carrasquilla’s initiative, this has been the political strategy of the Minister of Finance, José Manuel Restrepo: listen, analyze and to get better.

In addition to the search for consensus by Minister Restrepo, the very content of the project has made it easier for the political parties to give it their decided support. Having excluded the middle class from paying taxes and having focused the debate on the possibilities of social programs and on how to deepen them served a lot to build agreements with the political parties that rejected Carrasquilla’s proposal.

Finally, it is also important that the new Tax Reform is not one of the points that originate social mobilization by young people who continue to demand a response to their social demands. This, however, is one of the points demanded by the National Unemployment Committee (CNP) that last Thursday, April 26, marched in the streets of several cities with a very low call.

In terms of time, by legislative regulation (15 calendar days are required between the approval in committees and the plenary session), the Tax Reform will be discussed in the plenary sessions of the Senate and Chamber (it could be simultaneous) starting next Thursday, September 9. If all goes smoothly as expected, the initiative will meet the government’s schedule: approval in mid-September and enactment in early October.

Here are some of the basic points of the Tax Reform project that will be discussed in the plenary sessions of the Senate and Chamber:

  • The social cut of the initiative is maintained. Among the articles, those that extend until December 2022 social programs such as the Formal Employment Support Program (PAEF), the targeting of women heads of households in programs such as Solidarity Income and an incentive to generate female employment stand out. Similarly, the subsidy from Colombia Mayor for people in extreme poverty or extreme poverty is increased, as long as there is budget availability.
  • The SIMPLE regime is strengthened, which will benefit at least 400 thousand micro and small entrepreneurs with a differential rate that also contributes to business formalization.
  • The project also aims at economic reactivation thanks to the inclusion of measures such as new direct credits from FINDETER to territorial entities and maintaining credits with compensated rates from this entity, from BANCOLDEX and other financial entities of the State.
  • The Works for Taxes mechanism was improved to reach more vulnerable areas of the country and support will be given to businessmen affected by the blockades and closures during the months of the strike.
  • A modification of the three days without VAT that includes cash purchases was included in the proposal.
  • In addition, the DIAN and the territorial entities will be given more powers so that they can facilitate the tax payment processes through termination by mutual agreement, discounts in interest and penalties for defaulters, contentious-administrative conciliation and the principle of favorability in the collection stage. . This set of measures will mean additional resources for 600 billion pesos in the next year and a half.
  • Among the articles eliminated from the original project of the Ministry of Finance are: the one that established that notaries use georeferencing tools to know the commercial value of the goods, and the one that proposed a reduction (from 5% to 0%) for withholding at the source to foreign investors who invest in Treasury Securities (TES) in the Colombian market.