undeniable. In less than 100 days, President Gustavo Petro managed to get Congress to approve the two flagship projects of his government program. A tax reform aimed at raising twenty billion pesos, the most ambitious in history, presented to Parliament a day after he took office as president. The other price has to do with total peace. The extension of Law 418 of 1997, opening the door for the government to dialogue with rebel groups with political motives and with criminal organizations interested in disarmament and submission to the law in exchange for some benefits. They also demand approval of the new Budget Law and ratification of the Escazú Agreement.
There is a precedent to consider. It has to do with the tax reform that López Michelsen’s government enacted ahead of its 60-day reign, a tax reform that included reorganizing income taxes, turnover and a change in the inheritance system. The only structural reform that was then considered the most progressive and innovative of all developing countries.
The fundamental difference from the current one is that the 1974 was adopted by decree without debate in Congress, a constitutional mechanism that does not exist today.
The two reforms, yesterday’s and today’s, are similar in the dispute started by unions and the Economists’ Party, which had to back down. First, Congress, under political pressure from recently enacted regulations, passed Relief Act 49 of 1975, which corrected the fiscal excesses. The great economist Roberto Junguito, who is sorely missed, wrote in his book One Hundred Episodes in the Economic History of Colombia: “But the strangest thing about this episode, as in the study by Guillermo Perry and Mauricio Cárdenas (1986), is that it was the López Michelsen government herself who, at the end of her term, enacted what the above authors called a counter-reform through Law 54 of 1977.
Yesterday’s bochinche passed us by like the song. The mess is more complicated now. Politics, trade unions and above all the academy are in turmoil; the state accounts do not match those of the academy. The energy sector’s effective tax rate fell prey to contradiction. While Minister Ocampo believes that the oil sector will increase from below 30% to 38%, Fedesarrollo director Luis Fernando Mejía, a scholar who stands above good and evil, claims that the rate that will affect the sector will be of 36% will rise to 60.3%; a good example of the magnitude of discord. While Fedesarrollo shares the need to raise the effective tax rate, it claims the increase is excessive and discourages investment. Oil production could be reduced by 82,000 barrels per day.
Another sacred cow of Colombia’s economy, columnist Carlos Caballero put the icing on the cake. “The lack of definition of oil exploration, the absurd idea of levying income tax on royalties and the huge increase in the sector’s effective tax rate threaten the production and export of oil, with the loss of the main oil producer .Foreign currency… And an unfortunate one Statement by President Petro is enough for the cost of Colombia’s debt and the exchange rate to skyrocket the next day.
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Regaining ground against the dollar to prevent “additional earnings being largely used to pay bonds and interest and what is eaten does not come out for what is served,” is Ricardo Ávila’s wise Sunday musing in his Primer Plano, is part of the a task to be attended to by the government of the twenty billion that will flow into their pockets.
The Autonomous Committee of the Fiscal Code has also set its grain of sand: “Revenues from exploration and exploitation of hydrocarbons are crucial to Colombia’s fiscal stability and balance of payments.”
Such is the uncertainty about the President’s success that all that remains is the counter-reform – just like in 1977 – which is essential to righting the wrongs.
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