Tax Reform 2023

Published on: May 4, 2023

Reading time: 2 min

Controversial Reform

The 2023 tax reform in Colombia has been one of the most controversial topics in recent months.

Since its introduction, it has generated criticism from civil society, business owners, and some political sectors.

Its Objective

The goal of this reform is to collect more resources to finance public spending and reduce the country’s fiscal deficit.

However, many believe that the proposed measures are unfair and will negatively impact the country’s economy.

VAT Increase?

One of the most controversial aspects of the tax reform is the increase in VAT on certain goods and services, including hotels and airline tickets, which are once again subject to a 19% VAT.

Additionally, the exclusion from VAT and the exemption from tariffs and the national tax on gasoline and ACPM in border areas were eliminated.

End of VAT-Free Days

Additionally, regarding the VAT-Free Days, the National Government announced that these events will not take place.

Income Tax

Another highly discussed point of the reform is taxing the income of individuals earning more than $10 million COP per month.

According to the government, this measure aims to increase the progressiveness of the tax system and reduce the gap between rich and poor.

However, some business owners and economic experts have warned that this could discourage investment and negatively affect the country’s economic growth.

Reducing Tax Evasion

The tax reform also includes measures to reduce tax evasion, such as the obligation to declare assets held abroad, strengthening the DIAN (National Tax and Customs Directorate) to combat evasion and smuggling, and the use of technology as a key factor through electronic invoicing.

These measures have been well received by some sectors, as tax evasion is considered one of the main problems of the Colombian tax system.

Other Taxes

However, another important aspect of the tax reform is the taxes on ordinary exports, sugary drinks—which will be taxed based on sugar content in grams per 100 milliliters of beverage—and ultra-processed foods, which will have a 10% tax.

There are also taxes on single-use plastics and carbon.

Conclusion

The 2023 tax reform in Colombia has been highly controversial and has sparked a large number of criticisms and protests throughout the country.

It is expected that with the entry into force of this reform, 20 trillion COP will be collected, of which 11 will come from the mining and energy sector, 4 from legal entities, and 1.3 from individuals.