Colombia’s first left-wing president in decades, Gustavo Petro has secured ambitious tax reforms to raise revenue for social programmes. He made history with his victory in the June 2022 election and has spared no time on reforming the tax system.
Not even six months into the job, Petro has set out plans to raise capital gains tax from 10% to 15% and impose a 5% surtax on top of a 35% corporate tax rate. This is alongside the OECD’s pillar two minimum effective rate of 15%.
The 5% surtax applies to certain sectors such as financial services and insurance. It would hit stockbrokers earning more than Col$4.7 billion ($989,000). At the same time, the tax plan would impose a temporary tax of 1.5% on equity of more than Col$5.7 billion from 2023 to 2026.
The Petro tax plan includes a wealth tax on any net worth of more than Col$3.3 billion and a VAT extension to digital sales revenue.
However, the Petro administration faced protests in Bogotá, Cali and Medellín over its indirect tax measures – especially the surcharge of Col$200 per gallon of gasoline. Other indirect measures include taxes on sugar and plastic.
Meanwhile, credit agencies including Fitch Ratings doubt Colombia will be able to improve its rating, though its debt will likely remain stable. Petro may be raising revenue, but he’s also raising spending.
