Ending the simple tax regime would be a hard blow to the popular economy

The Ministry of Finance continues in a race against time to convince Congress to approve the 2025 budget, whose accounts remain unconvincing because they depend heavily on factors such as the financing law or the possibility of advancing the fiscal rule to avoid being underfunded and threaten economic stability and investor confidence in the future.

Precisely, in the midst of efforts to show that the Budget calculations General of the Nation are viable, this week he announced several aspects of the financing bill proposal that he will take to the Legislature and there was one point that caused a stir, since it aims to end a strategy that was born in the government of Iván Duque and that apparently is not to the liking of this administration.

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This is the simple tax regime, which according to Minhacienda they will seek to end with the bill that seeks $12 billion for the PGN 2025, considering that it is better to leave all taxpayers in the same system and with the same rules, of course, taking into account that there are different characteristics that will be taken into account, such as the size of the companies.

Warnings from a former director of the Dian

One of the strongest criticisms of this idea was from the former director of the Dian, Lisandro Junco, who said that a clean slate is being made, instead of building on tools that have proven to work and that the decision to end this system would be due more to political than technical factors.

“The simple regime was born in 2018 and was created in the Duque government as an evolution of the single tax. Building on what was built in the government of former President Santos, it evolves because what we were looking for was the same as the single tax against the risks of informality, with a simple tax system, and we achieved it because the Simple system manages to merge different types of taxes and compliance burdens,” said this expert.

As currently in force, the simple tax regime provides a treatment especially for small businesses and workers, to generate savings when paying taxes in a unified manner, offering low rates which are settled according to the level of income and linked to the payment of social security. As a replacement for this, the creation of a differential rate based on the size of the company is being considered.

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This is why, according to Junco, “this simplicity has generated a historic collection in which, as of July 2024, only the simple regime has already reached $1.8 billion, that is, everything that was collected in all in the year 2023”, while stressing that the intention to end it is born from the displeasure of this Government because “it was not created by them”.

Despite its success, the former director of the Dian told Portafolio that eliminating or modifying this regime could reverse the progress made in formalization and lead many entrepreneurs back to informality, thus losing the economic benefits achieved so far; a situation that It could certainly be taken as a blow to the popular economy, the flagship sector of the Casa de Nariño.

“People should demand that the Simple Tax continue to exist and even evolve, because it is something that the Constitutional Court itself did not repeal and on the contrary protected by declaring unconstitutional the changes made in the 2022 law, in the last tax reform; because it was shown that it contributes,” he concluded.

Banks operating in the country expect their portfolio to increase by between 7% and 8% this year.

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Finally, Juncio warned that chaos could be generated since the current system, which would be eliminated with the financing law, eliminates the need to face multiple tax calendars, allowing that businessmen only deal with the Dian, which is in charge to distribute the taxes corresponding to the municipalities.

It should be noted that the criticism of what is being done with the simple tax regime does not come only from the former director of the Dian, Lisandro Junco. Through social networks, several observations have also emerged from accountants and tax analysts, who reflect deep concern, especially among small business owners and independent consultants.

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Popular economy

For example, for the former Minister of Agriculture Andrés Valencia, “with the elimination “With the Simple Tax Regime, the government’s promises to strengthen the popular economy, sole proprietorships and independent consultants are disappearing, just like the popularity of this government. This is a terrible sign for young entrepreneurs.”

Popular economy

Alexis Munera

In addition to being seen as a negative signal for those who are betting on boosting the economy from a micro level, the warnings claim that those who turn to the Simple system find in this system an accessible way to meet their tax responsibilities without complications; thus, they would be moving in the opposite direction.

Criticism of this idea by the Ministry of Finance also pointed out that the possible elimination of the Simple Regime reflects a lack of knowledge of the importance of a tax system that is easy to understand and comply with, while it is feared that this decision will harm small business owners and entrepreneurs, who benefit from the simplicity of the regime. to manage your finances without worrying about complicated withholdings or cumbersome tax processes.