Tax Reform Gives More Jobs, More Equality

October 3, 2012 Taxation in Colombia

Colombian FlagBOGOTA – The tax system in Colombia is facing the prospect of an extensive reform, as the government aims to improve the livelihoods of national citizens.

With the aim of reducing social inequality in Colombia, helping to create at least 1 million new jobs in the country within two years, and decreasing the national unemployment rate from the current level of 10.5 percent the government of Colombia is reforming the national tax system, and the changes were detailed by the Finance Minister of Colombia Mauricio Cardenas on October 2nd.

As part of the reform, the Tax Reform Bill proposes the implementation of a progressive tax for personal incomes, a reduction of corporate tax from the current level of 33 percent to 25 percent, introduction of a new corporate “equity tax” at a rate of 8 percent, simplification of national VAT system and a reduction in the number of VAT tax categories from 7 to 3, reduction of the windfall tax on profits from the sale of assets held for over two years from 33 percent to 15 percent, and a reduction of labour taxes from from 29.5 percent to 16 percent.

New rules will also be instated to ensure that the regulations in Colombia to fight tax evasion and ensure tax compliance are on par with the standards seen in developed countries around the world.

The Tax Reform Bill will be presented to Congress this week, and voting on the changes will is scheduled to be held by December 2012.

The unemployment rate in Colombia is currently at approximately 10.5 percent, the highest in Latin America, and the country’s GINI coefficient, a measure of income disparity, is 57.3, the highest amongst all emerging developing countries.

Photo by DeptfordJon