Latin America Advisor 2022-09-27 – Inter-American Dialogue

LATIN AMERICA ADVISOR

A daily publication Of the dialogue

September 26, 2022

Will Colombia’s Tax Reform Lead to an Int’l Trade Dispute?

The Colombian government’s tax reform proposal could conflict with the country’s free trade agreement with the United States, critics say. Bogotá is pictured. // File Photo: Xxaljxx via Creative Commons.

Q

A major tax bill backed by new President Gustavo Petro moving through Colombia’s Congress includes an amendment that would apply duties and taxes to new categories of imports and shipments that were previously exempt. Petro has said his government needs the additional tax revenue in order to fund social projects, such as education and anti-poverty programs, while maintaining fiscal responsibility. But critics of the measure, led by business groups, say the new “de minimis” rule changes could conflict with the Andean nation’s free trade agreement with the United States or present new burdens to businesses, especially small- and medium-sized enterprises. What do the proposed rule changes involve, and how significant is the revenue they would raise for the government? What types of businesses and trade would be most affected? How likely are the changes to become law?

A

Francisco X. Santeiro, executive director of the Conference of Latin American & Caribbean Express Companies (CLADEC): “As with several business and industry organizations, the express industry has communicated its concern regarding the impact of the government’s tax reform proposal, which includes a modification to the existing ‘de minimis’ regime, limiting the value added tax (VAT) exemption for shipments up to $200 only to products whose origin is one of the countries with which Colombia has signed a free-trade agreement (for example, the United States). The current rule is to apply the VAT de minimis to shipments arriving from those countries, regardless of the goods’ origin. We believe that the modification violates Article 5.7(g) of the USCTPA, which states that ‘under normal circumstances’ no customs duties or taxes will be assessed on…”

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Merike Blofield
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Devry Boughner Vorwerk
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Joyce Chang
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Barbara Kotschwar
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Nicolas Mariscal
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Thomas F. McLarty III
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Beatrice Rangel
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Ernesto Revilla
Head of Latin American Economics, Citi

Gustavo Roosen
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Andrés Rozental
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