Next week, according to the Ministry of Finance and President Gustavo Petro himself, the new Financing Law or tax reform that the National Government is seeking will be submitted to Congress, in order to secure the $12 billion that is needed in the spending accounts for next year. a gap that, for some analysts and the Higher Council for Fiscal Policy itself, is larger.
Since it became known that this project would be presented, the discussion in the country has focused on whether this measure is necessary or whether its implementation could be counterproductive in these times of persistent slowdown. Likewise, there has been talk of the possibility of cutting the Budget to prevent new taxes from affecting the local economic dynamics.
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In order to address a vision from the academy, Portafolio spoke with Eleonora Lozano, tax lawyer and dean of the Faculty of Law of the University of the Andes, who first said that we must wait to know in detail what is proposed by the Ministry of Finance, although she added to the voices of those who warn that what has been announced so far may not be enough.
“There have been changes mentioned in the wealth tax, in taxes related to non-labor income, an increase in the rate of the occasional profits supplementary tax (15 to 20%), inclusion of tax relief to reactivate the economy, gradual reduction of the nominal rate of the income tax for companies from 35% to 30% and tax benefits for the tourism sector, with special emphasis on San Andrés,” he began by mentioning.
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Likewise, Dean Lozano indicated that although there is no official document, Reports show that options are also being considered for sectors that generate energy through non-conventional renewable sources, which could be good for the creation of new sources of sustainable development in the future.
Insufficient income
Reviewing each of the taxes discussed so far, Professor Eleonora Lozano stressed that their potential would not be sufficient to achieve the goal set by the Ministry of Finance, especially if it relies solely on the wealth tax and non-labor income tax.
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“According to the Medium-Term Fiscal Framework 2023, the collection as a percentage of GDP from the wealth tax is 0.1%. During the 2023 tax year, the government collected just over $1.2 trillion from the wealth tax. For the 2024 tax year, the government expected to collect $1.5 trillion from this same item. It should not be forgotten that the contingent resource in the Budget is $12 trillion (0.7% of GDP),” he said.
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In this regard, he concluded that “the percentage of revenue provided by the wealth tax is low, in proportion to the quota. Its impact will depend, of course, on the rate increase or adjustments to the determination of its taxable base”, while in relation to non-labor income, he explained that there is a difficulty in making the historical calculation of its revenue.
Tax culture
Considering that the two paths reviewed for now do not seem to be sufficient, the dean of the Uniandes Law School stated that the path could be in strengthening the tax culture, since it considers that there are enough taxes, but evasion prevents them from being truly effective.
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“Fiscal policy should increase the capacity of the tax system to prevent evasion, tax avoidance and abuse of legal forms, in order to ensure greater tax compliance. If there is a high level of non-compliance, actual revenues could be lower than expected,” he said.
Lozano also said that the best way to strengthen this line is by dissipating any form of government corruption and proper expenditure execution; therefore, based on their experience, work must be done on the development and implementation of Codes of Ethics for the tax administration, advisors and taxpayers.
Economic recession
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“The Government could review and adjust the tax benefits and exemptions that currently exist. This could include reducing deductions for certain incomes, or eliminating exemptions that do not fulfill their original purpose. Tax incentives must be cost-effective, meaning that they are temporary and must be constantly reviewed to see if they have fulfilled their purposes,” he concluded.
Finally, the Dean stressed that work must be done on the efficiency of tax administration to ensure better collection by the Dian and reduce tax evasion; a point on which she recalled that for the year 2024 and 2025, 4,700 new officials will join the team with the aim of improving this work.
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