Analysis: Duque in Colombia set to get tax reform, but little more, last year

BOGOTA, Aug.6 (Reuters) – Colombian President Ivan Duque expected to get approval for a long-delayed tax bill in his last year in office, but other unpopular reforms are unlikely to pass a congress divided, according to analysts and lawmakers.

Center-right leader Duque never had a majority in Congress, and anti-government protests in May and June diminished his already low popularity, making Congress unlikely to support reforms before the May election, when the left could win seats on the back of growing social discontent.

Lack of progress on economic, pension and labor reforms could lead to longer-term problems for Colombia, whose credit rating has already been downgraded to junk by two rating agencies, analysts said.

Amended tax reform, worth nearly $ 4 billion a year in additional revenue, is finally set to pass after an earlier version was withdrawn amid protests and opposition from lawmakers, costing the post. the former Minister of Finance.

Gathering support for other major changes will be a big challenge, experts say.

“I’m not sure (Duque) will have sufficient legislative support, especially since an election year is approaching,” said Mauricio Jaramillo, professor of politics at the University of Rosario.

Standard and Poor’s and Fitch downgraded their investment ratings for Colombia to scrap in May and July respectively, citing the country’s budget deficit, large public debt and medium-term uncertainty. The downgrade prevents many funds from investing in Colombian debt.

Moody’s has said it will wait and see what tax reform measures are passed before deciding whether or not to lower its rating. The next Colombian government will have to adopt new tax reforms to solve the structural problems that are holding back Latin America’s fourth-largest economy, he said.

Because pension, labor and tax reform efforts have sparked street protests over the past three years, the government is likely to proceed with caution, Colombia Risk Analysis analyst Sergio Guzman said.

“The government knows that its legislative proposals could become a trigger for the marches and this is not conducive to leaving a legacy, nor to promoting political continuity,” Guzman said.

Whether left or center-left politicians are able to turn dissatisfaction with Duque into victories next year will depend on who emerges, what happens with the economy, and whether the weak peso attracts foreign investment.

“There is still a long way to go before we say that this government has given the left a platform,” Guzman said.

VARIOUS PRIORITIES

Lawmakers have various priorities for the current legislative session, which began in late July, ranging from regulating community approval processes for infrastructure and energy projects to efforts to complete the implementation of an agreement. of peace of 2016 with the rebels of the left.

Duque’s Democratic Center Party is focused on tax reform, which it says will help revive the economy and fund social programs, including so-called solidarity payments to poorer households.

“The pandemic has demanded a lot socially. We cannot fail to rise to the challenge,” Democratic Center Senator Fernando Araujo told Reuters. “We need to expand solidarity payments… with real work incentives and wage subsidies.”

The tax reform law would increase corporate taxes by 4 percentage points to 35% from 2022 and reduce government spending, among other measures. Read more

Duque said he also wants to ensure free tuition for poor and working-class students and pass a police reform bill that he says will protect human rights through a better training of officers.

Meanwhile, lawmakers from parties such as the Liberals and Just Free Colombia have called for criminal charges to be taken against those who commit or encourage acts of vandalism or property damage during protests.

The national strike committee, made up of large unions and student groups, has proposed a law to establish strict protocols for policing protests, after numerous accusations of violent abuse by officers.

The group also proposed a one-year basic income, equivalent to the minimum wage, for 7.5 million households affected by the pandemic.

Reporting by Carlos Vargas; Written by Julia Symmes Cobb; Editing by Nelson Bocanegra, Julia Symmes Cobb and Daniel Wallis

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