Colombia Tax Reform Bill Heads To Congress

Colombia’s government will send its tax bill to Congress this week, seeking to reform and streamline taxes and promote investment. One of the main pillars of the bill is the reduction of Colombia’s corporate income tax rate – currently one of the highest in South America – from 38.5% down to 32% by 2009. It also seeks changes to value-added tax (VAT) by introducing an additional level of VAT, rated at 10%, on staple foods. The VAT change is likely to meet resistance in Congress as it will affect all levels of society. The financial transaction tax of 0.04% looks set to remain, despite talk of it being reduced or even scrapped. There is also likely to be a new assets tax, perhaps at around 0.3%, for assets above the $0.5 million mark. The tax reforms, which overall will help to simplify and streamline the tax system in Colombia, is seen as a positive step forward by the markets.