BOGOTA, April 15- Colombia's government on Thursday proposed a$ 6.4 billion tax reform to the Congress that would increase deductions and eliminate taxes on individual and business businesses.
The measure, considered key by financial markets and analysts to boost the fiscal pressures caused by the coronavirus pandemic and keep the country's credit rating, aims at curbing tax collection by 23.4 trillion pesos a year, equivalent to 2% of the gross domestic product.
It is a virtual reform if we compare it internationally, said Minister Alberto Carrasquilla during a moderate presentation.
Some provisions of the Reform Package, which would come into force in 2022 largely due to opposition sources, have already come under fire from the lawmakers. One year before the elections, it will face a difficult path to approval.
Funds raised by the plan would go toward spending shortfalls, economic programs and social rejuvenation.
Changing the law would increase an additional 7.3 trillion rupees from the value-added tax by individuals and 17 trillion from firms. It would also raise dividend taxes to 15% from 10% and expand a carbon tax to include all fossil fuels and 14 billion pesos through a duty on single-use plastics.
The Fiscal Deficit of Colombia increased last year to 7.8% of the Gross Domestic Product and the country increased its debt to the equivalent of 64.8% of GDP to address coronavirus-related needs, even as the economy shrank 6.8% and tax collection fell.
The government has predicted a fiscal deficit of about$ 26 billion this year, equivalent to 8.6% of GDP and economic growth of 5%.
In Colombia, the annual tax income is equivalent to 19.3% of GDP and the deductions are estimated at about 6.5% of GDP.
Credit rating agencies have said that they will review the country's investment grade rating if the reform proposal is approved.