Colombia’s tax reform fails to tackle tax evasion: chief prosecutor

Nestor Humberto Martinez (Image credit: La FM)

Colombia’s chief prosecutor slammed a tax reform on Monday, the day it took effect, claiming the new tax system fails to confront the mass tax evasion that has long undermined the country’s fiscal system.

Prosecutor General Nestor Humberto Martinez sent a letter to the Minister for Finance raising stern objections regarding the extensive reform bill that took effect on January 1.

According to Colombia’s top prosecutor, the tax reform does not provide for the misconduct of taxpayers, who allegedly are hiding assets worth as much as a quarter of the country’s entire GDP in foreign tax havens.

Colombia’s elite hiding more than a quarter of country’s GDP in tax havens

“It would be a mockery by any Colombian Prosecutor General to say that we are taking a certain, firm step against tax evasion,” said Martinez in the letter to Minister Mauricio Cardenas.

“Unfortunately the law did not foresee anything about the conduct of taxpayers who omit their duty to file income tax returns, deceptive behavior manifestly harmful to the public purse,” added Martinez.

Colombia’s lawmakers approved the bill last week which aims to raise billions of dollars in the coming years to make up for lost oil revenue and preserve the Andean nation’s investment grade credit rating.

Colombia’s Congress approves tax reform in bid to raise billions

However, the Prosecutor General has reacted furiously as he claims that the “anti-evasion article” whereby tax evaders will be punished for the “omission of assets” does not go far enough to secure full compliance with the new rules.

“The initiative accepted by the Conciliation Commission penalizes the ‘omission of assets’ in tax returns, a conduct that will not have any relevance from the criminal point of view, to the extent that it is impossible to characterize this conduct. In fact, as you know, income taxpayers do not make a list of assets, so this behavior can never be attributed, ” he said in the letter.

The reform, expected to bolster tax revenue by 6.2 trillion pesos ($2.07 billion) in 2017, is seen as crucial to preserving Colombia’s BBB investment grade credit rating and is needed to fund anti-poverty programs.

The government forecasts revenue will reach 24.1 trillion pesos by 2022.

The reform raised value-added tax to 19% from 16%, excluding basic products such as food and medications, among other changes.

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