Colombia’s finance minister will announce a new tax reform Tuesday, which allegedly targets the nation’s wealthiest workers.
Among the major items of the fiscal reform will be a tax increase on the rich. Under the new plan, Colombians earning more than $4.44 million a month will pay a minimum of 5% income tax, however all deductions and benefits will remain in place.
While the proposed rate may seem low, Finance Minister Mauricio Cardenas claimed that, “On average, people who earn more…will have to pay more taxes.”
A luxury tax on items such as new cars, brand watches, and iPods would also come into effect.
“The reform is built on three main principles. First, this is not a reform to simply increase revenue. Second, we are looking for a tax system that helps reduce the enormous inequality in our country….We want this to be a progressive reform…that allows those with greater ability to give relief to those with less resources,” said Cardenas.
In an interview with El Tiempo published Saturday, Cardenas said of the third principle, “We are the country with the highest unemployment on the continent. We need a tax reform that will help us create a modern and formal workforce.” Recent figures from the National Administrative Department of Statistics (DANE) indicated that approximately 2.25 million Colombians are affected by unemployment.
The reform is also designed to reduce the rate of payroll tax for companies. Cardenas believed the payroll tax was one of the heaviest burdens on employers and has made it difficult for companies to hire labor in Colombia. As a result, “the reform will benefit the sectors that generate more work,” claimed Cardenas.
The finance minister will table the final draft of the legislation later this week for further scrutiny.
Cardenas, who previously served as Santos’ Mining Minister, took over responsibility for finance in late August during a cabinet reshuffle.
