Colombia’s government doesn’t just want to impose an 18% sales tax on basic food products, but also on school books and newspapers.
The controversial tax reform presented to Congress by President Ivan Duque‘s finance minister seeks to introduce an 18% sales tax on all kinds of goods that used to be exempt from this tax.
If you take it exactly as it is now, inflation may double, almost to 6%.
Banco de Bogota chief economist Camilo Perez
Promoting both hunger and ignorance?
According to the proposal sent to congress, school books, school utensils and newspapers are among the goods that will be taxed after decades of government policies that exempted basic goods and educational material to prevent Colombia’s extreme inequality rate to deteriorate even further.
Economists have already rejected the proposals, claiming this would lead to soaring inflation and further impoverish the country’s lower-income inhabitants and the poor.
They were joined on Thursday by business leaders and politicians, even from within Duque’s own governing coalition.
We don’t embrace a sales tax on the basic shopping basket… Applying this tax is not the way forward.
Conservative Party Senator Efrain Cepeda
Duque insists his tax reform will benefit the poor
Following the storm of criticism and contrary to what multiple Colombian economists have said, Duque insisted that imposing taxing on food, which disproportionally affects the poor, will stimulate the economy.
The sales tax debates are complicated, but we want to correct a reality that is that the people with the highest income are the ones who benefit the most from month to month when they shop for the exempt goods, to the detriment of those with the lowest income.
President Ivan Duque
Duque — who claims that low-income households will be compensated for their reduced spending power — failed to mention that his controversial tax reform also seeks to lower income taxes for the country’s top earners.
The revelation that newspapers will also increase 18% in price turned even the country’s media, who have traditionally been close to the country’s ruling elite, against the government.
Considering the fundamental economic sectors for the development of the country and Colombian democracy, it is a contradictory that the government who promotes the “orange economy” presents an article that is detrimental to reading, education, the press and the media, just when all of them and as a global and indisputable phenomenon, go through the greatest challenges they have ever had for their sustainability.
Association of News Media director Werner Zitzmann
The growing resistance against the tax plan, also in the country’s business sector and congress, is making the approval of the tax reform increasingly unlikely, and would leave the country with a budget deficit of more than $4 billion.
The last time Carrasquilla was Finance Minister, between 2003 and 2007, extreme poverty in Colombia went up 0.7%. This year alone, more than 160 infants died of malnutrition, primarily because of government corruption and state neglect.