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The Government will present the tax reform to Congress in the first semester of 2021 and although the Commission of Experts on Tax Benefits is still preparing a preliminary report of recommendations, the Deputy Minister of Finance Juan Alberto Londoño announced that the VAT taxable base would be expanded. “There are certain goods that we can tax, not tax the entire family basket, that will not happen, but we can expand the base of products that pay VAT,” said the official.
Today, according to data provided by Dian, there are 98 products of the family basket that are taxed with a general VAT rate of 19, another 10 of them have another of 5% and 73 are exempt or excluded, that is, they are in the 0% group. Thus, there would be up to 83 products to which this new rate could be applied in the reform if the base is expanded.
For example, products in the basket such as eggs, milk, cheese, panela, chicken, beef, beans, among others, could go from being exempt (0%) to having a VAT rate of 19%. There are also goods taxed with 5%, such as sugar, coffee, chocolate or salt, to which it could be applied.
Likewise, today bananas, oranges, onion, potato, cassava, tomato, carrot, salt or rice, among others, do not pay VAT.
However, the idea behind this tax reform is that people with higher incomes pay more taxes, so, by making VAT more progressive, the Government plans to expand the refund scheme for this tax. “We can expand the base of products that pay VAT with a very important mechanism and that is to make a large VAT exemption to the most vulnerable sectors so that they do not feel this increase in taxed products,” said Londoño.
In fact, it was proposed that the refund be made to almost 30% of the Colombian population that is in a vulnerable situation. “Today a million people are being returned and we are seeing that there is a situation of vulnerability of almost 30% of Colombians,” said the Vice Minister of Finance. In addition, President Iván Duque had already stated that social and tax reforms are needed in the country to address the effects of the pandemic.
It must be remembered that in the eye of the Government in this reform there are 92 billion pesos of exemptions that the Tax Statute currently has for individuals and companies, of which 74.93 billion pesos are focused on the VAT tax.
Among the reform proposals are also expanding the taxpayer base of income tax and taxing higher pensions. It is worth mentioning that according to what was announced by the Government, although the tax would be processed in 2021, the new measures for VAT would only apply from 2022.
THE FIGHT AGAINST EVASION
According to the Vice Minister of Finance, the implementation of the electronic invoice helps to reduce tax evasion. It is expected that this year the universalization of the measure will culminate. “The electronic invoice is going to mean that these people cannot evade taxes because we have the traceability of goods and services and we can identify who is not paying taxes. We come from a process that has worked, which this year must conclude, ”said Vice Minister Juan Alberto Londoño.
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