Colombia’s Petro to Present Bill to Offset Lost Tax Revenue

(Bloomberg) -- Colombian President Gustavo Petro said he will present a financing bill and an economic recovery plan to congress after his administration was forced to cut the budget due to overestimating tax revenue.

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Petro said the decision comes after a Colombian court “destroyed” a proposed tax reform guaranteeing fiscal revenue, in a post on X on Tuesday. Last year, the Constitutional Court struck down a regulation that forbade fossil fuel companies from deducting royalty payments from corporate taxes, resulting in fiscal costs of 6.7 trillion pesos ($1.7 billion) due to missing payments and rebates in 2023 and 2024, according to government estimates.

The Andean nation is suffering from sluggish growth and low tax revenue, which has the government considering wider budget deficits to give it some leeway to spend.

Last month, Finance Minister Ricardo Bonilla said Colombia would freeze the budgets for state agencies and public institutions and reduce public spending by about 20 trillion pesos ($5 billion). The finance chief said that Colombia will post a fiscal deficit this year 5.6% of gross domestic product, the widest since the pandemic, compared from a previous target of 5.3%.

An independent committee that oversees the nation’s fiscal rule said Tuesday that Colombia needs to cut spending by an additional 31 trillion pesos to comply with the fiscal rule.

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