Taxing times

Violent protests lead to withdrawal of fiscal reforms in Colombia.

Protesters in Colombia have taken to the streets in opposition to a fiscal reform that the government designed to mitigate the current economic crisis, resulting from the COVID-19 pandemic, but would disproportionately hit low and middle income households. Demonstrations turned violent and have led to 24 deaths.

While anger over fiscal reform was the catalyst, it was the latest in a list of grievances against inequality, corruption and a worsening COVID-19 situation that the Colombian government, led by President Iván Duque, failed to understand.

A political scientist in Colombia commented, “It is unclear why the government presented a fiscal reform that was so short-sighted and unpopular. Even before the protests, it was clear it would not pass in the Senate. I don’t understand why they went ahead.”

“It is unclear why the government presented a tax reform that was so short-sighted and unpopular. Even before the protests, it was clear it would not pass in the Senate.”

Political scientist, Colombia

Protesters were initially the new middle-class who feared the changes would see them slip back into poverty. They were joined by the working class, trade union members, students and indigenous communities. Incidents in all major urban centres, especially Cali and Bogotá, prompted the government and former President Álvaro Uribe, a staunch supporter of Duque, to accuse the protesters of joining forces with left-wing paramilitary groups associated with former FARC members. However, the international community, including the UN’s human rights division and Human Rights Watch have demanded restraint from government police forces.

A professor of politics and economics at a prestigious university in Colombia explained, “Although fiscal reform is needed because the country is ‘bankrupt’, it is very difficult for it to happen with this government and in the middle of an economic crisis. There needs to be a more constructive agenda that protects the most vulnerable people and ensures coordination between ministries. Increasing costs for the poor and putting an even greater tax burden on the middle classes won’t be accepted in an economic downturn while there are still tax exemptions for the rich.”

“Although the tax reform is needed, because the country is ‘bankrupt’, it is very difficult for it to happen with this government and in the middle of an economic crisis.”

Professor of politics and economics, Colombia

The Colombian government has withdrawn the fiscal reform bill which potentially affected all population segments with salaries of USD 656 per month or more. The reform eliminated exemptions to individuals and increased taxes on business and VAT.

The government is yet to formulate a new fiscal strategy as it plans to open up consultations with stakeholders. However, Colombia’s GDP dropped by 6.8% last year and Duque’s popularity and political support is low, making it improbable that he can push forward any significant fiscal or health reform.

The professor walked us through possible outcomes, “There is still uncertainty so various scenarios exist: 1) Duque is going to lead a national conversation, this won’t work as the committee leading the opposition is not representative of the protesters. 2) The government might issue a decree of internal commotion which would result in the repression of protesters but would question Colombia’s democracy. 3) The protests may wear out and end without political leadership to represent them and push their agenda forward. 4) The situation could deteriorate further resulting in the resignation of the President, although this is uncommon in Colombia.”

As of 11 May, the talks between President Duque and the committee leading the opposition had failed to reach an agreement and a new demonstration is scheduled for Wednesday 12 May. Hold your breath…

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