巴黎银行-南美地区-宏观策略-哥伦比亚税收改革：短期疼痛，长期受益-20181031-7页_732kb

Colombia's Tax Reform Summary

Core Content

Colombia's government has proposed a significant tax reform bill aimed at reducing the corporate tax burden and restructuring the tax code. The reform is expected to have short-term challenges but is viewed as a positive step for long-term fiscal stability and growth.

Main Points

• Corporate Tax Reduction:
  Colombia has the highest effective corporate tax rate among OECD countries, around 60%. The reform aims to reduce this by 12 percentage points (pp) by 2022. In 2019, the government expects to generate an additional 1.1 pp of GDP in revenue through the reform.

• Elimination of Exemptions:
  The draft reform eliminates most tax exemptions on goods and services, which is expected to reduce the total VAT-exempt items from 37% to 20% of the CPI basket (see Fig. 1). However, food staples are not included in the exemption list, which may lead to inflationary pressures.

• VAT Adjustments:
  The reform includes a 3 pp increase in the standard corporate tax rate and a 2 pp cut in the value-added tax (VAT) rate. Additionally, a tax break for capital goods is introduced, which is expected to offset some of the initial negative impacts.

• Impact on Growth and Inflation:
  While the reform may cause a temporary dip in consumer confidence and consumption in Q1 2019, the net effect on growth is expected to be positive. Inflationary risks are anticipated, with a likely one-off shock of around 1 pp in January 2019, which is expected to decline during the year. This could lead the central bank to delay its normalization cycle to Q1 2019.

• Stabilisation Fund:
  The government has announced the creation of a stabilisation fund from oil revenues. This is expected to reduce capital expenditures by the central government, which were previously supported by oil receipts.

• Fiscal Targets and Reforms:
  The reform is seen as consistent with the government's fiscal stability goals and budget balance targets. If the wider taxable base is maintained, the fiscal framework may strengthen in the medium term.

• Congress Scrutiny and Outcomes:
  The bill is expected to face scrutiny by Congress and may be watered down. There is a likelihood that basic staples will be reintroduced as tax-exempt items, which could reduce the revenue gain by 0.4 pp to 0.7 pp of GDP and necessitate additional spending cuts in 2019.

• Rating Outlook:
  Despite potential changes, the reform is viewed positively and is unlikely to affect the country's ratings outlook. Rating agencies are expected to respond favorably to the structural changes proposed.

Key Information

• Effective Corporate Tax Rate: ~60% among OECD countries.
• Tax Reform Goals: Reduce corporate tax by 12pp by 2022 and generate 1.1pp of GDP in additional revenue in 2019.
• VAT Exemptions: Reduced from 37% to 20% of the CPI basket; food staples are not included in the exemption list.
• Inflationary Impact: Expected to be a one-off shock of ~1 pp in January 2019, with a decline during the year.
• Stabilisation Fund: Created from oil revenues to reduce government capital expenditures.
• Rating Agencies: Likely to react positively; no changes to ratings outlook expected.
• Congress Impact: The bill may be diluted, with a possibility of reintroducing exemptions for basic staples.

Figures

• Fig. 1: CPI basket composition by VAT charge, showing the reduction in VAT-exempt items.
• Fig. 2: Simulation of Colombia's "fair" sovereign rating, indicating stability in the near term.

Disclosures

This document is a marketing communication and not investment research. It may contain non-independent research and is subject to conflicts of interest. It is intended for professional clients and eligible counterparties. The information is based on public sources and may not be accurate or complete. No assurance is given that any transaction will be entered into on the terms mentioned. This report is not intended to be a prospectus, advertisement, or public offering.

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Conclusion

The tax reform is a significant structural change aimed at improving fiscal stability and reducing distortions in the tax code. While there are short-term challenges and risks, the long-term benefits are anticipated to outweigh these, leading to a more stable fiscal framework and positive growth outlook.