Tax reform needs a social look, not just technical

Eliminating exemptions, fighting corruption and reorganizing public spending and the participation of both the community and the unions in the construction of the reforms are some of the measures that would promote a better fiscal scenario.

In the words of Jorge Rodríguez, dean of the Faculty of Economic Sciences of the National University of Colombia (UNAL), the recent look has been to ask when a tax reform is needed, how much to cover the fiscal gap, if VAT or tax on rent, etc.

“The technical aspects are very important, but as evidenced by the social situation as a result of the failed tax reform of the Duque government, this approach is insufficient, it is necessary to review the economy and the tax policy in society and its relationship with the State, in addition to considering the distributional aspects and taking a sociological look, ”says the dean.

Also read: This is the tax reform proposal that seeks to make the richest pay more

For his part, the doctor in economics José Antonio Ocampo, professor at Columbia University and former co-director of the Bank of the Republic, considered that due to the situation of the pandemic, the national unemployment, the increase in poverty, inequality and unemployment , social spending needs to be a long-term issue.

During the event “Political economy and sociology of fiscal reform”, organized by the Association of Economists of UNAL and the Center for Research and Development (CID), the expert warned that as a result of the pandemic the national public debt reaches the 65% of GDP, the highest in history.

“The level of taxation is relatively low if the figures from ECLAC or the OECD are used, it is even lower than the Latin American average, something like half of the latter organization, so it is logical to think about how the sustained increase in income will be financed. social spending; Yes, a new tax law is needed, and one that includes reducing tax benefits in a relatively generalized way, for example in income and capital gains, since they practically do not have a significant degree of taxation in the country. On the other hand, he proposed having a permanent wealth tax, “says Dr. Ocampo.

The role of MSMEs

According to Rosmery Quintero, president of the Colombian Association of Micro, Small and Medium Enterprises (Acopi), “the unions were not given space to contribute in the construction of the failed tax reform, and the criticisms were related because it was not measured the impact of the pandemic or the degree of uncertainty ”.

He also pointed out that “if it were clearly known until what date this critical moment is going, there would be more tranquility about the decisions that correspond to each company, but due to the pandemic there is a total epidemiological dependence, who will ensure the good behavior of companies when it has not been possible to reactivate the productive apparatus and efforts are made not to lay off or even regain employment? ”.

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Another point that the union leadership addressed was that the need for such recurrent reforms shows the structural problems of the country, and that citizens tend to feel that fighting corruption would avoid reforms that imply more taxes.

Also read: Economists and the current crisis

Spending structure

Another guest at the event, the philosopher and economist Salomón Kalmanovitz, former dean of UNAL and former co-director of the Banco de la República, stressed that the State only collects 14% of the national wealth, and that even the 2019 reform returned 1 point of the GDP to the richest companies.

In this regard, he mentioned that the effect of said reform came to be seen in the pandemic and that the state collection should be about 5 points of GDP above the current one, to fulfill its functions against the monopoly of force and social needs.

“A quarter of public spending goes to servicing the public debt. The Government is increasingly dependent on the credits for those who buy Colombian bonds and that makes it vulnerable and even sets off the alarm of losing the investment grade, the lack of taxes has been replaced with debt and that is not sustainable, “he said. .

His recommendation is that the tax reform should go to direct taxes; correct the share of indirect taxes and reduce credits; increase financing based on taxation and eliminate exemptions for individuals and companies that would contribute to the treasury in order not to resort to taxes that punish people with fewer resources.