Effective Tax Rate: Andi figure does not coincide with the Government

Effective Tax Rate: Andi figure does not coincide with the Government

Through a press release, the Colombian businessmen and industrialists unionized in Andi ratified the figures that it has been presenting throughout the debate on the tax reform on the Effective Tax Rate and invited the Ministry of Finance to reveal its full study, broken down by sector.

(Effective Tax Rate for companies would reach 29.4%).

Andi made several observations to the calculations presented by the Ministry of Finance, because according to the businessmen, the Government ignores the tax benefits; they assume that dividends always pay the highest marginal rate; they do not know that all the profits are not distributed as dividends, and do not take into account that part of the Tax on Financial Movements (GMF) and the ICA consumers end up paying for it.

According to Andi, to estimate the Effective Tax Rate, the Ministry affected the income rate with the wealth and dividend tax (applying a 19% discount).

(How the Fed rate hike impacts Colombia).

“In the first place, we highlight that the bases on which the calculations are made are different from those originally published in the bill, partially accepting some of the concerns expressed by Andi from the very moment of its publication. This is a sign that the alarms raised by the business sector have indeed been taken into account, which we consider to be very positive. It is worth clarifying that from the methodological point of view, the comparison today is made with the adjustments planned until now, and not with what was originally proposed by the government”.

Effective Tax Rate.

For Andi it is useful that it has been done in this way, because it allows us to note that although they are adjustments that go in the right direction, they are very far from having structurally solved the situations that were initially alerted by the businessmen.

It adds that the Ministry’s statement appears to be a summary of a study that should be published in its entirety, to deepen your analysis.

(Income, equity and earnings, changes to natural persons).

“It is necessary to clearly know the bases of legal analysis, metrics, samples and impacts by sector, in which those who enjoy better tax benefits can be better appreciated. In particular, we propose to carry out a sectoral study of the effects, since the aggregate averages always tend to ignore fundamental aspects for decision-making related to the construction of public policies”.

Even though the calculations and methodology would be different, In any case, the report from the Ministry of Finance does not contradict the numbers presented by Andi because it compares figures that are not comparable.

“While the Ministry shows effective rates only for income (affected by two taxes), Andi uses the government take methodology for its calculations, which includes all taxes, fees and contributions”, explains the guild.

Finally, Andi reiterates the suitability of the figures that it has been presenting throughout the tax reform debate and invites the Ministry of Finance to reveal its full studybroken down by sector and taking into account the total tax burden assumed by an entrepreneur when carrying out their activity in Colombia.


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