(Bloomberg) -- Colombia’s government is proposing new tax increases on wealthy individuals, gambling platforms and carbon emissions to rein in the fiscal deficit without cutting social programs.
Finance Minister Ricardo Bonilla submitted a bill to congress on Tuesday intended to raise 12 trillion pesos ($2.8 billion) next year. The changes would lower the threshold for paying wealth tax, and impose higher levies on online gambling and hybrid vehicles.
The bill also includes a gradual reduction over five years of the corporate tax rate, to 30% from 35%, though this excludes coal and oil companies, Bonilla told reporters in Bogota Tuesday.
Nearly half of the extra revenue would come from an accounting change: bringing forward the implementation of the fiscal rule to 2025, will give the government an additional 5 trillion to spend, according to the text of the bill.
The government says it needs extra revenue to finance its 2025 budget without taking on excess debt.
A group of lawmakers, including members of the opposition and independent political parties, have proposed a proposal to slash the 2025 budget by the same amount the government aims to collect through taxes. Despite this, President Gustavo Petro said that his administration will push ahead with the tax bill regardless of congress’s decision on the budget cuts.
The leftist leader said in a post on X that his administration will “cut public spending without touching the poor and social spending”, if congress decides to lower the budget.
The fiscal deficit will widen to 5.6% of gross domestic product this year, its highest level since the pandemic, according to the government’s forecast.
Second Round
If passed, this would be the second round of tax hikes since the leftist leader took office in 2022, pledging to improve the welfare of poorer Colombians.
Colombia’s congressional committees responsible for budget matters will vote on the proposal to reduce the budget on Wednesday. Senator Angelica Lozano from the Green Alliance political party said her budget committee has enough votes to force spending cuts next year.
Petro recently emerged from a social crisis triggered by a truck drivers’ strike protesting a rise in diesel prices. Following disruptive blockades, the government agreed to a more modest fuel price rise than it had initially sought, dealing another blow to the fiscal accounts.
--With assistance from Andrea Jaramillo.
(Updates with more details from the bill and Petro’s comments from 4th paragraph)
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