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Colombia’s mysterious $4.4B tax break for oil and mining firms

Private oil and mining firms in Colombia have been registered as public entities with the country’s tax office since 2005, according to newspaper El Tiempo.

The extraordinary interpretation of tax law cost the Colombian tax payer a staggering $4.4 billion (13 trillion pesos), the newspaper reported.

The state council was forced to interfere and banned the extraordinary tax norm for oil and mining companies.

The companies will not longer be able to deduct royalties from their corporate tax as if they were government offices.

For undisclosed reasons this had become custom in the sector after a tax norm was “misinterpreted” in 2005. The State Council, however, said this had been illegal.

The ban had been urged after audits by opposition Senator Jorge Robledo, who is also running as a candidate in the 2018 presidential election.

It would be the equivalent of what it costs to finance the health of 19 million Colombians or pay the entire budget of the National University for eight years.

Robledo report

Marxist Senator Jorge Robledo formed an “anti-corruption” coalition with Senator Claudia Lopez and former Governor Sergio Fajardo ahead of the 2018 elections.

Oil and mining companies had reportedly been seeking to deduct royalties since 1998, but were turned down by the DIAN.

Business association ANDI, at the time led by Defense Minister Luis Carlos Villegas, asked this decision to be revised in 2004, which was granted by the tax office the year later.

The State Council reportedly had been investigating the legal interpretation’s validity since 2012, according to El Tiempo.

The ANDI’s Mining Chamber, which had requested the reinterpretation of the law, would not respond to the newspaper’s requests for comment.

Whether criminal charges will follow the State Council decision is unclear.

Colombia’s mysterious $4.4B tax break for oil and mining firms was last modified: October 30th, 2017 by
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