Colombia’s government has submitted a sweeping fiscal reform bill to Congress, seeking to cut public spending by about 15 per cent and increase revenue through tax measures to prevent further deterioration of the country’s public finances.
The proposed “Rescue Law” comes as rising public debt and interest payments put pressure on the budget, threaten investment and complicate efforts to restore Colombia’s investment-grade credit rating, which it lost in 2021.
Vice President José Manuel Restrepo described the bill as an economic rescue operation needed to address what he called a “time bomb” facing the country in 2027.
He said one out of every three pesos collected in taxes was now being used to service interest on public debt.
Under current budget assumptions for 2027, Colombia’s fiscal deficit could reach 9.4 per cent of gross domestic product, a level the government considers unsustainable.
The government said about 70 per cent of the proposed fiscal adjustment would come from spending cuts, while the remaining 30 per cent would be raised through higher taxes on wealthier Colombians and other taxpayers, alongside stricter enforcement measures.
The proposed tax changes include expanding the value-added tax base and increasing or extending levies on tobacco, vaping products, alcohol and sugary drinks.
The package also provides for changes to personal income tax, a temporary surcharge on the financial sector and stronger measures to tackle tax evasion.
In addition, the government plans to sell state-owned assets considered unproductive as part of efforts to raise revenue.
However, the bill also proposes lower tax rates for micro, small and medium-sized businesses, as well as incentives for large investment projects.
