Taxes for Catatumbo would lead to deceleration and loss of competitiveness

On January 24, President Gustavo Petro and his ministerial cabinet decreed the state of internal shock in the Catatumbo region, in order to deal with the economic and social crisis that the inhabitants of this area live, Because of the wave of violence and conflicts between the ELN guerrillas and other criminal groups.

Subsequently, on February 14 of this year, Decree 0175 was announced, through which “tax measures are intended to meet the expenses of the general budget of the nation to face” to this exceptional state and since then, a national debate on the effects of said norm has begun.

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A recent report by the Crowe CO firm addresses this issue and argues that there would be at least six direct impacts to the Colombian pocket, in addition to changes in the rules of the game for four important productive sectors, which would derive in loss of competitiveness, fall in investment, blows to the cost of living and the strengthening of the deceleration that has been lived for months.

Pedro Sarmiento, Director of Taxes and Legal Services of Crowe CO, and author of the report, says that this measure, which seeks to raise approximately $ 3 pesos pesos for the Catatumbo, the Metropolitan Area of ​​Cúcuta and the Department of Cesar, imposes new temporary taxes to various key sectors of the economy, whose effect has not been reviewed carefully.

“These measures, far from increasing the collection that the national government needs, could have a Bumerang effect, slowing the investment, reducing economic activity and increasing tax evasion,” he said.

Lucky and chance games online

Starting from a thermometer in which he classified the impacts as “very high”, “high” and “medium-high”, The analysis begins with the games of luck and chance online, for which it ensures that it will generate an increase in the cost for users, reduction in income for companies, greater administrative load and increase the risks of evasion.

Similarly, they point out that the number of players on online betting platforms could decrease due to several factors such as demand price elasticity, which in similar markets has shown a range of -1.2 A -2.0. This means that a 10% increase in costs reduces demand between 12% and 20%.

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Thus, with the VAT implementation of 19%, a proportional or even greater drop in the number of active customers is expected. This without the competition with unregistered illegal or foreign platforms, since in countries where similar taxes have been applied, up to a 30% of players have migrated to unregulated markets in search of lower costss.

Extractive and industry

On the other hand, Pedro Sarmiento also referred to the new special tax of the internal sale and export of hydrocarbons and coal, and warned that it would increase its operational costs between 2.2% and 2.3%, reducing foreign investments between 10% and 15%, while the non -deductibility of the tax in international treaties, it would also directly affect the gross income of exports, increasing tax evasion up to 10%.

“This without having the loss of international competitiveness, that would range between 3% and 5%. Likewise, greater difficulties in carrying out extractive projects are expected, reducing production between 5% and 8%, impacting employment in the regions that depend on this sector, ”he added.

Catatumbo.

AFP

Meanwhile, he maintains that the implementation of the bell tax would increase the fiscal burden of companies in the construction sector between 1% and 1.5%. Likewise, an increase in financing costs is expected between 20%and 30%, reducing the execution of public and private works up to 15%.

“This would directly impact the purchase of housing, it would decrease between 5% and 10%, and infrastructure investments would lower between 20% and 25%, affecting the generation of employment and the growth of the sector, ”said spokesman Crowe Co.

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Taking as reference the timbre tax on financial operations would raise their tax commitments between 1% and 1.5%. This would impact profitability (up to 5%), would increase the administrative load (5%to 8%), reduce applications for new credits (20%to 25%), and reduce foreign investment (up to 30%).

Blows to the pocket

With all the above, from Crowe CO they also addressed the effects From the internal shock decree in the pocket of Colombians, starting because users of online betting platforms will receive less money to play, since the VAT of 19% will be discounted from the deposited amount.

Another important effect will be the increase in the tax burden on the energy mining sector, which could translate into an increase in the price of gasoline and diesel, since this will impact the cost of transport and basic products, generating pressure on inflation.

Recession

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Additionally, electricity would rise in regions where coal is key in energy generation, making public services more expensive and affecting households and companies; While the credit cost would also be affected, since banks could transfer the new customer tax through higher interest rates or new administrative costs.

“This would make mortgage and consumption credits more expensive. Likewise, the construction companies that finance projects with credit will face greater costs, raising the final price of the house and making access to the purchase of real estate, impacting the real estate sector, ”they said.

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Finally, the measures of the internal shock decree could have A negative impact greater than expected, since the employment, investment, production and economic stability of the country would be affected, exacerbating phenomena such as social inequality and poverty in several areas of the territory.

“The most impacted regions will be those where the extraction of hydrocarbons and coal represents a significant part of local GDP and employment, including Catatumbo (northern Santander), the municipalities of La Jagua de Ibirico, El Paso and Becerril (Cesar), Cerrejón, Maicao and Albania (La Guajira) and the Meta departments, Casanare and Arauca, which live mainly and oil, ”Sarmiento said.

Thus, the study by Crowe CO closed by setting the alarms so it could mean an increase in forced migration in cities such as Bogotá, Medellín and Barranquilla, following the decrease in job opportunities in the departments affected by the current conflict, further deepening urban inequality and overloading public services in these urban centers.