The new president in Colombia, President Iván Duque, has proposed a tax reform bill to help the country boost economic growth and increase productivity.
There have been more than ten different reforms in the last twenty years for the country, so the hope is that this plan will increase the tax revenue while helping the country.
The new laws are effective as of January 1, 2019 but the process to turn this bill into a law is long and involved with four debates in the Congress, two debates in the House of Representatives and two debates in the Senate after which it can be ratified by the President. It is possible that many of the changes may not make it through the process.
There is concern that the draft submitted by the national government does not respond to the needs of Colombia. In addition to not proposing a structural reform, the proposal is to mainly tax the population of the middle class, while leaving aside important sources of income that could contribute to making the tax system more equitable and progressive.
Proposed tax changes in Colombia
One of the proposed changes will create a single form called the SIMPLE Taxation system for micro or small companies to use in order to settle their tax obligations. This will help to reduce costs. One of the goals of this reform is to create methods to reduce the high tax burden that is currently on companies. The hope is that the reduction will increase job creation and growth for the companies.
The new taxes will be higher on upper earners. People with an average monthly income greater than $ 40 million, will have an income tax rate of 35%, income greater than $ 50 million will have a rate of 37% and greater than $105 million will have a rate of 39%.
The bill would reduce the corporate income tax rate from 33% to 30% and income from some activities would be subject to a corporate income tax rate of...