Colombia’s finance minister and a leading lawmaker will meet this week to consider reducing tax obligations for some of the millions of people and businesses affected by devastating torrential rains, according to a report by Caracol Radio.
Angel Custodio Cabrera, a congressman and president of the House Of Representatives’ finance committee, told the radio station he and Finance Minister Juan Carlos Echeverry will discuss whether to forgive some taxes altogether or at least postpone them for a period of years.
Lashing rains caused by the La Nina weather system began over the past year and have killed more than 400 people and left more than 3 million people either homeless or affected in some way. The downpours have caused massive flooding and landslides in many areas, resulting in billions of dollars in damages as buildings, highways, bridges and crops were washed away.
In early 2011, Minister Echeverry said that to avoid rain-related deficit spending the government would increase taxes by lowering the threshold on a wealth tax. With the government now considering a reduction in taxes, the country’s fiscal deficit may come under more pressure.
On May 5 the government said that due to the bulging costs related to the rains it had to increase its 2010 consolidated fiscal deficit to 3.2% of gross domestic product, or 17.7 trillion pesos ($10 billion), from an earlier-stated 3.0% of GDP.
In general, Colombia’s has been successful in recent years at lowering its fiscal deficit, which helped convince Standard & Poor’s rating agency in March to give the government’s foreign bonds investment-grade status. The government hopes to obtain similar status from other ratings agencies, but some of those agencies have reportedly said they first want to ensure the government’s deficit spending is under control.
So far this year, Colombia has reported a better-than-expected tax collection. On May 6, President Juan Manuel Santos said the latest figures show the 2011 tax haul is 15%, or 2 trillion pesos, more than the government’s own “ambitious targets.”