Understanding the Petro government’s tax reform

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Supporters of Colombian President Gustavo Petro elected him to challenge the status quo. The country’s first leftist president, who took office on August 7, has made big promises: to halt oil exploration, wean the country off coal and forge peace deals with existing rebel groups.

But perhaps its greatest promise is to change the socio-economic dynamics of the country by reducing poverty and inequality. Colombia is one of the most unequal countries in the world, surpassing its regional neighbors Brazil and Mexico.The Economist reports that it would take a poor family in Colombia 11 generations to reach the average income.

In April 2021, amid the pandemic and difficult economic times, then-President Iván Duque introduced an increase in income tax and VAT, increasing the costs of products for all days. Colombians took to the streets to express their displeasure and riot squads responded with force, killing more than 50 in clashes.

Enter Petro. The new leader’s solution to Colombia’s macroeconomic needs is also a tax hike, but it is very different from Duque’s. Silvana Amaya, a political analyst at Control Risks, describes it as “one of the most ambitious tax reforms ever presented by a government”. Because of this, it has the potential to drastically change the state of the country, and people from all socio-economic backgrounds have their eyes on what’s to come.

Petro introduced the bill to Congress a day after his inauguration, signaling how high a priority it is for his administration. It’s unclear exactly when or if this will pass, but the push and pull for changes has already begun. AS/COA Online spoke to experts to help explain the landmark reform.

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