Colombian Government Proposes Broad Tax Overhaul to Congress

Colombia’s government submitted a broad tax-overhaul proposal to Congress that raises taxes on ordinary Colombians and cracks down on evasion in a bid to fill a budget shortfall created by lower oil prices, The Wall Street Journal reported. At stake is the vaunted sovereign credit rating in Latin America’s fourth-largest economy and President Juan Manuel Santos ’s ambitious plans to modernize a poverty-stricken countryside. Both Fitch Ratings and Standard & Poor’s earlier this year warned of downgrading Colombia’s BBB rating unless the government found a way to raise revenue. “If we don’t do this reform, we are going to have serious problems,” Finance Minister Mauricio Cardenas said in a news conference. “They are difficult decisions, but we have acted responsibly.” The proposed changes broaden the tax base by obligating many small businesses to declare income for the first time and raise the value-added sales tax on nonbasic food to 19% from 16%. The government’s proposal, which will be debated by legislators in the coming weeks, also aims to simplify the corporate tax code while promising jail time for tax evaders. Read more. (Subscription required.)