At last they do not go away: days without VAT will remain, but they will make changes

On August 8, when the project for tax reform of the government of Gustavo Petro, One of the most striking points of this proposal was the elimination of days without VAT.

(See: Check and adjust.)

Those days were the banner of the government of Iván Duque, because, as justified by the previous mandate, they helped reactivate and revitalize the Colombian economy.

Now, almost two months after the announcement of its elimination, it was announced that the days without VAT, finally, were included in the tax project and will continue, but with changes.

(See: Experts ask for more analysis and not rule out the days without VAT).

The new dynamic of the days without VAT would be only two days for 2023 and not 3, as happened in 2020 and 2021.

Also, the discount would apply only for national products.

“I gave my endorsement to the two days without VAT for national products, a specific list of products, which I think is a good alternative. In fact, we had already spoken with Fenalco about this matter. But yes, it will only be for national products, because the days without VAT that have been running were for imported products and that is not the purpose of that tax benefit.”, said the Minister of Finance, José Antonio Ocampo.

The minister commented that the benefit will be maintained for some equipment such as appliances, and added that the fiscal impact will be “relatively small”, about $100,000 million, but that it will be compensated with a positive impact for the national industry.

The president of Fenalco, Jaime Alberto Cabal, celebrated the decision: “From Fenalco we celebrate that the days without VAT are maintained but transforming them into products made and produced in Colombia. In this way, small and medium commerce continues to be stimulated, as well as national production and industry.“.

When the elimination was discussed, Fenalco and other unions asked to keep these days, otherwise, “it would be a social and economic mistake“.

During 2021, the three days without VAT left total sales of $31.1 billion, and the two days of this 2022 showed sales of $9.1 billion (March 11) and $10.6 billion (June 17).

Thus the things and according to this new announcement, the third day of this year could carry it out, although it will be necessary to wait for what is decided in this regard. The date on which it was contemplated was next December 2.

(See: This would raise detergents and toothpastes with the tax).

During these days, the consumer buys products without paying the Value Added Tax (VAT) of 19%. Currently, up to 3 units of the same good can be purchased.

When informed of its elimination, the Petro government explained that the days without VAT “have negative effects on tax collection, to the extent that it reduces the tax revenue associated with the collection of this tax and generates administrative difficulties in tax matters“.

Added that they could be highly regressive, since households with higher incomes are the ones that consume the most.

(See: Why the Government would be willing to raise less than $25 billion).

“It is important to assess the relevance of this measure in the current economic context, in which consumption incentives could result in an overheating of aggregate demand, which would aggravate the inflationary pressures that the country currently faces and would result in a deterioration in the well-being of the population“, he stated.