Tax reform to finance Colombia’s state budget in 2026 dies in Congress. Time passes between maneuvers that delay discussion in the Senate, stagnant joint tables, and a negative presentation from the majority of the committee studying the project that Gustavo Petro’s government intends to collect 16.3 billion pesos (about 4,000 million dollars) to cover the deficit in its accounts. However, the defeat is not complete: in parallel, another project is being processed, known as the Economic Reactivation Law, which emerged as a more viable financial alternative and which passed the first debate last Tuesday. This move would allow members of Congress to disapprove of tax increases, the government to obtain resources, and the opposition to celebrate the collapse of the tax rate.
Olga Lucia Velasquez Neto, representative of the Green Alliance Party and rapporteur of the alternative plan, explains to this newspaper that they intend to raise up to 12 billion pesos through the law. “The responsible thing is to look at where this money is coming from, not that the state has been left without funding,” he says. He adds: “This measure aims to avoid the closure of about 8,000 companies that are today on the verge of bankruptcy.” The project includes tax exemptions for companies in crisis, such as 90% reductions in interest, fines, and penalties for tax debts, in addition to conciliation mechanisms for judicial processes. In short, it is about replacing the usual tax proposal with tax increases, with incentives that push defaulters to catch up.
The measure has already faced criticism: “It is a bad precedent that debtors are exempted without any consequences. Colombians are told that nothing happens if they do not comply with their tax obligations, and they wait three years for the next relief,” Senator Angelica Lozano, of the Green Alliance party, warned the newspaper El País (in fact, the Constitutional Court has already banned amnesties). In addition to exemptions, the Reactivation Act brings in some taxes, focused on very specific sectors that can be defended as corrections to economic inequality.
For example, he proposes increasing fees on foreign platforms from 3% to 6%, such as Meta – owner of Facebook or Instagram – or Alphabet – owner of Google – which sell digital advertising in Colombia. “The World Health Organization is already talking about a 21st-century mental health pandemic fueled by social networks,” Velasquez says. They also propose expanding the scope of the tobacco tax to include e-cigarettes, e-cigarettes and other nicotine devices; Or impose a 19% value-added tax on low-value purchases on platforms like Shein or Temu “to stop unfair competition and stimulate local trade,” Velázquez explains, defending an initiative aimed at increasing collections without hurting the big tax or the majority of taxpayers.
The deficit, increasingly large
The need for more resources is clear. The government is already suffering from cash problems, and if taxes do not boom, the fiscal deficit could escalate to 8% of GDP, a level unprecedented in modern history. The deterioration continued, and in September its total reached 98.4 billion pesos (5.4% of GDP, 27 billion more than last year), according to Finance Ministry data. Luis Carlos Reyes, DIAN’s first director under the oil government, sums it up bluntly: “It could happen for the second year in a row, and with a very clear possibility that the reform that finances the budget will not be approved. It is a narrative of a death that was predicted,” he asserts.
The economist’s diagnosis is substantive: “In Colombia the budget is seen as a black hole into which money is poured and you don’t know how much of it is being put to good use.” Added to this lack of clarity is political resistance to further tax increases. “We don’t see the will,” Velazquez laments, noting that the chairs of the Third and Fourth Senate Committees, which must approve the tax bill, realized that the votes were not available to advance the financing bill.
Not surprising. Conservative Senator Efrain Cepeda was clear: “We will sink tax reform in Congress,” he said in an interview with Newsweek. the time. The opposition, and independents who oppose the tax bill, have implemented a delaying strategy. For example, on November 19, a joint table was held to discuss the project, but the two vice presidents of the chamber, the independents Daniel Carvalho and Juan Sebastian Gomez, refused to sign. Without those endorsements, the proposal cannot be voted on, leaving the tax bill in limbo, just three weeks before Congress closes for the December recess.
The slow wreck was confirmed Friday, when 10 of the 18 senators in the 3rd Committee made a presentation calling for tax reform to be delayed. That proposal must be the first thing to be discussed and voted on in the joint economic committees scheduled to be held this Tuesday, and it is sufficient for that committee to approve it for the project to sink. Although the ruling party can appeal the decision to another committee, efforts are focused on what is more obvious: the alternative plan.