What does Petro's tax reform consist of? 6 keys to what we know (so far)

Who did Petro and Márquez thank for their triumph in Colombia?

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(CNN Spanish) --

The current tax system in Colombia has a "clear bias in favor of excessively rich people," says the program with which Gustavo Petro and Francia Márquez won the elections, and raises the need for a tax reform .

What would it imply concretely?

The intent is clear, but the specific changes remain unanswered.

This is what we know.

Ricardo Bonilla, economic advisor to the Petro campaign, explained this week in an interview with Noticias Caracol that, so far, what there are are ideas discussed within the framework of the campaign that must become a reform project that must be " arrange" with different actors.

This project must be approved by Congress to become a reality.

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The draft is not yet ready, he affirmed, but his public interventions, as well as the Historical Pact program, Petro's statements and expert analysis allow us to explore what is being negotiated.

Plus taxes on the 4,000 large fortunes... or the 40,000

In statements during the campaign, Petro explained that the highest tax burden would fall on "the 4,000 largest fortunes in Colombia," a figure that according to his adviser came from a Canadian mission of experts that analyzed the issue and concluded that this number of people does not they were paying their fair share based on income.

What is the underlying problem?

Identify those revenues.

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"The multimillionaires of the country do not have their own income. They only have income through their companies. So, since there is double taxation, if they charge taxes on dividends, they say 'look, my company already paid taxes on its profits. How do I will you charge me twice?'

But what they don't say is that the vast majority of them, their cars, their apartment, their entire rhythm of life is maintained by the company," Guillermo Sinisterra, Dr. in Economics and professor at the Javeriana University, told CNN en Español.

The next source is foreign exchange.

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Bonilla put it in other words in an interview with Blu Radio when addressing the changes they want in the income tax: "Today, medium and high-income individuals do not have their income fully identified, many are subsumed in company expenses and their assets are not fully identified" so there must be a "purging" job.

Once the number is made, it could increase to about 40,000, which is 1% of the four million tax filers.

Translated into numbers, the adviser speaks of targeting those with incomes of more than 200 million pesos per year (around US$ 50,000).

Less tax benefits

"We will gradually dismantle those tax benefits that, without due economic and social justification, introduce serious distortions to competition, encourage mining-energy extraction and primarily privilege, or are used mostly in their favor by, natural and legal persons with high incomes and assets" , says the Historical Pact program, and affirms that because of these benefits, the equivalent of about 3.5% of GDP per year is lost.

Bonilla points to the elimination of exemptions and benefits and to establish "single rules of the game", although this would imply reviewing the "acquired rights".

Dividends, another pillar of Petro's tax reform

In the Historical Pact program, a tax reform was proposed that, among other aspects, would focus on dividends: that it be mandatory to declare them and they always have to pay taxes.

Sinisterra explained that one of the proposals that was handled in this regard is to increase the percentage of payment for dividends from certain figures of 2% as it is now to 15%.

Would this make businessmen leave the country?

"They are talking about a stampede of people who are going to invest in another country, but the truth is that almost all countries are converging in that sense, especially in this post-pandemic moment in which the country needs cash," he analyzed. .

The expert believes that Petro has a chance that the reform will pass in Congress.

There may be changes in the percentages, for example, but the supports would allow him to advance.

And the VAT?

"My tax proposal consists of increasing taxes on bankers and oil workers, while my opponent's proposal consists of increasing the tax on food," Petro wrote on June 16, a few days before the second round.

Bonilla insisted this week that the basic basket will not be "touched" when asked about VAT and that more time can be expected to have an "orderly discussion" about the goods that are excluded from the tax.

Bet on dialogue

How can negotiations with the business sector be approached?

"The big businessmen (those he describes as" serious ") what they want is to talk to the presidents," says Sinisterra.

Sit down and negotiate.

Therefore, according to his vision, "the president-elect has a great curtain of opportunities to sit down and talk if that is his true intention and reach some agreements."

In the negotiations a fundamental piece will be the Minister of Economy.

Knowing who will hold that position and what line they will promote, multiple voices agree, will help reduce post-electoral uncertainty in Colombia and would be the beginning of a new moment in this transition.

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In fact, in an interview granted to Blu Radio after the election results, Bruce Mac Master, president of the National Association of Entrepreneurs of Colombia, said that he would have liked a clearer message from Petro after the result about who the people are. who will be at the forefront of economic policy "and the kind of ideology behind it.

Getting to know the team quickly, he argued, would provide peace of mind and help deal with uncertainty.

Petro proposes a change in Colombia: what challenges does it face?

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The OECD benchmark

Petro and Márquez's program, which bets on an increase of 5.5 points of GDP in tax collection, says that they want to bring Colombia "gradually to the level of taxation of the OECD countries."

In 2020, according to a study by the Organization for Economic Cooperation and Development, which is made up of nearly 40 countries, Colombia was considerably below the OECD average.

The average of these countries was tax revenues that represented 33.5% of GDP, while in Colombia the percentage rose to 18.7%.

Above Colombia and below that average were 17 countries in Latin America and the Caribbean, including three of the largest economies in the region: Brazil, Argentina and Chile.

Mexico, which together with Colombia would complete the five largest, were then two steps below.

Elections ColombiaGustavo Petro