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New Colombian tax bill aims at oil exports to fund social spending

FILE PHOTO: Colombia's incoming Finance Minister Jose Antonio Ocampo speaks during an interview with Reuters, in Bogota, Colombia, August 2, 2022. REUTERS/Vannessa Jimenez

FILE PHOTO: Colombia's incoming Finance Minister Jose Antonio Ocampo speaks during an interview with Reuters, in Bogota, Colombia, August 2, 2022. REUTERS/Vannessa Jimenez

BOGOTA :Colombia's new leftist government on Monday formally proposed a tax reform bill to lawmakers which would raise some 25 trillion pesos (US$5.76 billion) in 2023, equivalent to some 1.72per cent of gross domestic product, in an effort to increase revenue for anti-poverty programs.

Finance Minister Jose Antonio Ocampo said the bill would eventually add some US$11.53 billion annually to government coffers, with revenue gradually climbing as the legislation comes into force.

The funds, raised by levying more charges on high-earning individuals and exports of coal and oil, will be directed toward an ambitious agenda of social programs - including anti-hunger efforts, free public universities, and aid for elderly people without pensions.

"We're seeking to contribute to equality and social justice with a more progressive tax system and also to assign the corresponding resources to government social programs and consolidate the fiscal adjustment that is clearly incomplete," Ocampo told journalists.

"Although there have been advances this year the fiscal deficit remains considerable."

The reform seeks to levy higher taxes on people who earn more than 10 million pesos (some US$2,300) monthly - about 2per cent of Colombia's population. It would instate a permanent wealth tax, and charge a duty on earnings from the sale of shares in companies listed on the stock exchange.

The reform would also levy a 10per cent tax on exports of coal, oil and gold on income earned when each commodity exceeds a certain price threshold, Ocampo said.

The threshold for oil would be US$48 per barrel, while coal exports would see the duty levied when prices exceed US$87 per tonne. The threshold for gold shipments would be US$400 per troy ounce.

The payment of royalties by commodity companies would no longer be deductible from their income tax payments under the bill, Ocampo added.

Oil and coal are the country's top exports and source of royalties. Colombian President Gustavo Petro has promised to bar all new oil development and move the country away from coal production.

The country's mining association said it would comment on the proposal later this week, while the head of the private oil producers' association said it would analyze the bill.

Petro's promises worry some in the market, but Ocampo - a long-time official - has made efforts to assuage those fears, telling Reuters in an interview last week that he will "not do crazy things or allow crazy things."

The reform would also tax sugary drinks, highly-processed foods and single-use plastics.

The bill should be presented with an urgency request by the ministry to facilitate its quick passage, said Senate President Roy Barreras, a member of Petro's coalition.

(US$1 = 4,337.28 Colombian pesos)

(Reporting by Carlos Vargas and Nelson Bocanegra, additional reporting by Oliver Griffin; Writing by Julia Symmes Cobb; Editing by Alistair Bell and Rosalba O'Brien)

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