The Securities Market Self-Regulator (AMV) warned of various effects on companies, economic growth and the development of the country’s capital market due to various points included in the bill Petro government tax reform.
(See: Vertical equity and other basic concepts to understand the tax).
According to the document published by AMV, “potential impacts of the tax reform on the capital market”, the significant increase in dividend rates, as well as the imposition of other taxes, “will result in an increase in the tax burden for entrepreneurship, in some cases higher than 60%, which will generate a more challenging environment for the creation and attraction of new companies to the Colombian market“.
The document also warns that this loss of dynamism would lead to fewer players seeking long-term financing, less local and foreign investment and, therefore, a tighter capital marketa condition that affects not only the business sector, but also households and the financing of the Government itself.
According to the entity, the above translates into a stock market with less depth and liquidity, which will hinder its competitiveness against the markets with which Colombia is in the process of integration, such as Peru and Chile.
(See: The impact that the tax on plastics would have on the family basket).
In this sense, the country would have the highest tax burden in the region for companies and a high burden for non-residents, as follows:
– Corporate taxation: Colombia 69%, Peru 35%, Ecuador and Chile 32% and Mexico 52%.
– Withholding for non-residents: Colombia 20%, Peru 5%, Mexico 10% and Chile from 35% to 44.45%.
(See: ‘Petro dividend tax would eliminate the country’s stock market’).
The AMV document also draws attention to the disincentive to individual savings due to an increase in taxation for natural persons who have incomes greater than 10 million pesos per month, regardless of the source; the reduction of caps on exempt income and deductions; Y the increase in the tax for occasional gains. Thus, it is added, incentives to generate income and accumulate capital are subtracted, affecting sectors such as housing and the public stock market in the medium term.
It is necessary to improve financing conditions for early-stage entrepreneurship.
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Finally, the AMV reiterated its willingness to work with the National Government so that the tax reform that ends up being approved in Congress be the one that best leverages the progress of the country.
(See: Tax vs. Colombians: the effects of the project on households).
“We understand the relevance of this bill. Likewise, we recognize the role of financial markets in converting the country’s savings into productive investment that improves the well-being of society. In this sense, we highlight the need for an equitable and competitive tax structure that enhances the role of the capital market in our economy.”, pointed out Michel Janna, president of the AMV.
The AMV is a private body that regulates, monitors, disciplines and professionalizes the stock market.
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