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Colombian President Iván Duque on Sunday called on Congress to withdraw its much-criticized tax reform law after five days of sometimes violent street protests in which at least six people have been killed.
The opposing president said his government would soon introduce an alternative bill “which is the result of consensus.” He insisted that some kind of fiscal reform was needed to stabilize Colombia’s finances and help cover the loss of income and the sharp rise in social spending caused by the coronavirus pandemic.
“The reform is not a whim. Reform is a necessity, ”he said in a video speech in which he was flanked by nearly a dozen members of his cabinet.
The notable absentee from the video was Finance Minister Alberto Carrasquilla, the architect of the reform. This fueled speculation on social media about him about to resign or be fired. Some commentators and some opposition politicians said the protests would continue until Carrasquilla left office.
Duque confirmed that part of the content of the original invoice would be rejected, including a plan to increase value-added tax on goods and services. It has also had to backtrack on a plan to increase fuel VAT.
However, duc suggested that the new text would require an increase in taxes on companies.
The reform is the most important legislation in Colombia this year. The state of investment quality of the country depends on it.
Both Fitch’s rate and that of Standard & Poor’s Colombia BBB- with negative outlook for long-term debt issuance. This is just a notch above the non-investment or junk state. Moody’s values Baa2 from Colombia, two scales above the rubbish.
If the reform fails or is diluted, there are many possibilities Colombia it will be reduced: it will be reduced from a small group of Latin American countries of investment quality that includes Mexico, Chile and Peru.
This would be a blow to a country that, despite its long civil conflict and its very chronic illegality, boasts of fiscal justice. In contrast to most Latin American countries, Colombia has not defaulted on its debt since the 1930s and has enjoyed investment status since 2011.
Protests against the reform began on Wednesday with a national strike that drew more people than expected. Protests have continued since then and have become violent, especially in the third Colombian city of Cali, where shops have been looted and buses burned.
Human Rights Watch, a U.S.-based NGO, said it had confirmed six protest-related deaths, four of them in Cali. A police officer was killed in Soacha, a sandy satellite city on the outskirts of Bogota. Local NGOs raised the number of national deaths to 20.
The government initially sought a reform worth 1.4% of GDP, or $ 4.1 million, eliminating some tax exemptions and expanding the tax base, among other measures.
Despite backtracking, Duque’s right-wing center-right party has less than 20 percent of the seats in Congress and could have difficulty getting the new bill through Congress.
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