BOGOTA, June 10 (Reuters) – Colombia’s government will present a “consensus” tax reform proposal to Congress in the coming weeks, finance minister Jose Manuel Restrepo said on Thursday, though just 10 days remain until the current legislative session is set to end.
The government has struggled to promote the watered-down 14 trillion peso ($3.9 billion) reform proposal to a reticent Congress, even as it tries to calm investor nerves and stay one step ahead of further potential credit rating downgrades.
The current session is scheduled to end on June 20, with the next beginning on July 20. Lawmakers and party leaders had previously expressed doubts a proposal could move ahead before this session ends.
Restrepo’s predecessor resigned after an initial reform was withdrawn amid sometimes-deadly street protests and lawmaker opposition.
“It is indispensable in this moment to construct consensus in the country, construct consensus between different social political, economic, business and youth sectors,” Restrepo said in a press conference. “We have achieved deals which will allow us to present it to Congress in the coming weeks.”
He was accompanied at the announcement by beneficiaries of government social programs, business guild leaders and lawmakers from the government’s legislative coalition and parties classed as independents in congress.
No lawmaker from parties classed as opposition was present.
The proposal is unlikely to move ahead this session, senator Carlos Abraham Jimenez, who accompanied Restrepo, told Reuters.
“For the project to go through this semester it would need to be presented today or tomorrow,” Jimenez said, saying his Radical Change party would support the bill to keep social programs going.
The reform is meant to shore up the Andean country’s finances after the economy was battered by the coronavirus pandemic. The new proposal will not increase sales taxes, but will target the coffers of companies and wealthy individuals.
Colombia trebled its fiscal deficit to 7.8% of GDP in 2020 and must cover a deficit equivalent to some $26.5 billion in 2021.
Uncertainty over the reform proposal has already led S&P Global Ratings to lower its rating for the country, sparking fears Fitch and Moody’s will follow suit.
Analysts at JPMorgan predict capital flight of up to $3.5 billion should another agency cut its Colombia rating, not including loss of potential incoming capital. Close to a third of Colombia’s public debt is held by foreign investors.
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