Which Ideas of Boric’s Tax Reform Could Petro Apply To Colombia?

Winds of change are blowing in Latin America, which already sees a new era governed by the left. With Gabriel Boric already in power and Gustavo Petro elected as president, Chile and Colombia are walking in the same direction with the intention of applying a tax reform that improves everything related to economic matters in their countries. For this, both presidents will be working "side by side".

On July 1, Boric signed the tax reform whose main objective is to find ways to finance its social programs. Health, housing, education, pensions, among others, are part of the ambitious project that he has been presenting since his electoral campaign. Of course, for all that to be possible, they will have to apply certain changes such as wealth taxes or new royalties for mining activity.

"The objective of a tax reform is precisely to move towards greater equality, to advance towards greater equality and social cohesion," Boric assured during his speech. Gustavo Petro will also look for ways to apply a restructuring of the income tax by raising the contributions of the richest. 

But, certainly, not everything is about political currents. The economist José Antonio Ocampo, Finance Minister of the government of Gustavo Petro, has played a fundamental role in this entire movement, since he was in charge of advising Gabriel Boric on his tax reform project. This first major initiative of the Chilean president is divided into four legislative initiatives, which will be presented to Congress between July and the last quarter of the year.

Colombia and Chile in the same tax image

Although the opposition of both leaders is alert and concerned about it, Boric and Petro understand that a productivity policy is necessary for their respective tax reforms to advance in terms of greater and better distribution of income. 

Also read: Why Is the Price of the Dollar Increasing in Latin America?

With all that, it is worth analyzing which ideas could be applied in Colombia soon. The most controversial would be the tax on the richest, where Boric set a 1% tax on those assets valued between $5 million and $15 million, and up to 2% on those that exceed these figures. Given this, Petro would execute a similar plan and would not only go for the 4,000 richest in Colombia, as he assured in his electoral campaign, but would also expand the range for those who have incomes greater than 200 million pesos per year.

For its part, the annual collection of both would go almost hand in hand. While Boric is aiming for 4.3% of GDP to raise $13 billion, the tax reform that Petro would aspire to would be around 5.5% of GDP. The Colombian leader's intention is to raise between $12,000 million and $18,000 million, which would end up being divided between reducing the deficit and investing in his 'Colombia World Power of Life' project.

In turn, two other points to consider could be dividends and the reduction of tax exemptions. As for the first, both presidents propose to declare them as mandatory in a percentage of 70%, which would serve to pay taxes. While the second would focus on gradually dismantling unjustified tax benefits that, among others, would only benefit high-income people.

Lastly, the pension system was one of the most attractive promises during the campaign and that today does not go unnoticed. With Boric guaranteeing a state pension of approximately $300, Petro will look for ways to unify the system so that it is a state guarantee and thus there is no private interference in benefits. In the end, it will not only be a brainstorming of common ideas between presidents of the left, but also the mutual support that will not be lacking in this new stage for Latin America.