President Juan Manuel Santos signed off on the 2015’s fiscal budget for Colombia which funding relies on the approval of a controversial tax reform.
The budget already approved by the congress and totals approximately $ 108 billions (COP 216,2 trillion), lacks $6.5 billion to get completely funded.
MORE: Colombia’s congress approves government budget for 2015
(Not) fixing the deficit
This deficit led executive power to propose a tax reform which was partially approved by the congress on last week. According to the treasury, this missing of funds is caused by the expiration of two duties by December 31 2014: the so-called “4 x 1000″tax which charges 4 pesos by every 1000 pesos in financial transactions, and a wealth tax that had generated controversy among employers.
Through this reform, the government aims to collect $24.4 billion in the following years.
MORE: Colombia wealth tax only temporary, govt proposes in response to employer’s concerns
The budget approved by Congress last month emphasizes the importance of the allocation of funds for social development; it would be the first time that it is assigned a larger budget item for education ($12,385) than for defense ($ 12,080).
Moreover, there was an increase on the allocation given for agricultural businesses, early childhood development and support for victims of violence.
Compared to 2014, government investment budgets contacted 1.28%. Notwithstanding, 45% of this budget, will be destined for social development programs — a flagship of Santos’ administration for peace building — such as social inclusion and reconciliation, health and welfare, housing, planning, labor, education, culture, sport and recreation.
MORE: Crunching The Numbers On Colombia’s 2015 Budget
Upcoming tax reform
A report published by Semana magazine showed that success on the peace talks in Cuba won’t necessarily imply an increase in the country’s GDP as had been predicted by the finance minister.
MORE: Peace with FARC would boost Colombia’s GDP growth by 1%: Finance Minister
The large amount of future costs for the reparation of victims and investment in agriculture won’t be sustainable through the current economic structure which might imply a new tax reform in 2015.
Even though Colombia’s economy during Santos’ administration has performed well above the global average, its dependence on oil prices is undermining its capability to cover its aspirations of a peaceful, equal and prosperous country, said Fedesarollo, a leading Colombian think tank on economic development.
MORE: Colombia oil production down 2.8%; growing concerns over 2015 budget deficit
Sources
- Las cuentas del posconflicto no dan (Semana)
- Proyecto de ley de presupuesto general de la nación 2015 (Ministry of Finance)
- “La reforma tributaria no fue aprobada al pupitrazo” (Portafolio)