The Colombian tax system is characterized by having a high tax burden on companies, and low collection on the part of natural persons. For this reason, the Organization for Economic Cooperation and Development (OECD) delivered a new report in which it analyzes the nation’s tax expenditures, and complements the analysis of the Commission of Experts on Tax Benefits.
(OECD presented analysis of Colombia’s tax policy).
The document indicates, as the Commission did in 2021, that the country is making a “excessive and systemic use of tax expenditures, to correct the structural deficiencies of the tax system”.
It is worth mentioning that the organism recognizes as tax expenditures for exemptions, non-standard deductions, credits, reduced rates and deferrals within the current system that deviate from a reference tax system. And he calls them “expenditure” since they are equivalent to public expenses executed through the tax system.
“When properly designed, tax expenditures can stimulate economic growth and improve well-being. However, tax expenditures often take a significant toll on tax revenue and can also lead to distributional problems and create distortions.acknowledges the OECD.
(Colombians, those who most distrust their government in the OECD).
The entity points out that the absence of a well-defined reference tax system, which it suggests technically, implies that some “tax expenditures, in which the following stand out: some that have not been identified; while other tax concessions that could be considered part of the reference tax system are reported as an expense, which gives rise to a biased estimate of the total income foregone from tax expenditure that Colombia reports”.
For the suggestion of that reference system, The OECD calculated foregone revenue from a wide range of tax expendituresbased on two depersonalized samples of tax returns of legal and natural persons, and exogenous information provided by the National Tax and Customs Directorate (Dian).
In addition, it recommends the publication of an independent annual report on this subject, which lists the expenses and quantifies the foregone tax revenue associated with them. The Dian also said that it will seek to publish a report annually in two courts, one on income tax and the other on VAT.
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