In Colombia, the future head of Taxes and Customs seeks to attract foreign investment

The government of Gustavo Petro, who will take office next month, wants to level the playing field by eliminating tax benefits that have tended to be given to politically connected actors, he said. Luis Carlos Reyesnamed by Petro to lead the Directorate of National Taxes and Customs, DIAN.

Instead, the Petro government wants to strengthen the rule of law and have clear and stable rules for business, Reyes said.

”The clear message we want to send is that foreign investment is welcome.” Reyes said Friday in a phone interview. “We are going to seek to create stable conditions that make investment in the country attractive.”

Colombia’s public finances deteriorated sharply after the pandemic, with the country losing its investment-grade credit rating last year. That means that Reyes has one of the main tasks in the next Administration, since, unless the Government can significantly increase revenues, it will be difficult to finance the stronger welfare state that Petro promised his voters.

The elimination of tax exemptions would allow the country to reduce the tax rates paid by companies, Reyes said. Although he did not mention specific sectors, tourism, construction, creative and cultural industries, and renewable energies benefit from tax incentives of various kinds.

Regarding salaries, the incoming government plans to reduce tax exemptions for people who earn more than 10 million pesos (US$2,300) a month, Reyes said. This could include voluntary contributions to pension funds and savings accounts to promote housing construction.

Taxes on dividends

The new government will also study how to increase taxes on investment income. One of the proposals being studied is to tax dividend payments at the same rate as salaries, which have a maximum marginal rate of 39%, compared to the 10% currently applied to dividends.

”In Colombia capital can and should pay more“, said.

The incoming administration’s tax reform is one of the top priorities and is likely to be introduced on August 7 when Petro takes office.

Colombia’s fiscal deficit will decline to around 5.6% of gross domestic product this year, according to government projections, down from 7.1% last year.

Reyes, 38, moved to the United States as a teenager, later studying in Miami before earning a Ph.D. in economics from Michigan State University.

He said that he held a meeting with officials from the United States Embassy in Colombia and that the United States Internal Revenue Service will cooperate with the Colombian tax authority to obtain more information on the assets that tax residents maintain abroad.