After the first weeks of validity of the new tax reform, it is noticeable the first impacts on the consumption of Colombians.
A group of experts agreed on this and analyzed the issue in the virtual forum “Tax Reform in force: Impacts, challenges and consequences” organized by Portafolio, with the participation of El Tiempo, Posse Herrera Ruiz, Buk, Baker McKenzie and Acrip.
(Read: Lights and shadows of the labor reform of the Petro government).
Jaime Alberto Cabal, president of Fenalco, one of the most critical voices in the approval process of the new standard, insisted that will cause serious effects on savings, consumption and investment and, necessarily, in economic growth and unemployment.
As he said, for example, those related to withholding tax as well as the surprising jumps in exempt income start to wreak havoc because the purchasing power of salaried people has been greatly reduced. “I think it is also an effect of the tax reform that the Day without VAT in December has not been carried out”, and he added that a relatively bad December was recorded with a contraction of 1.8% in sales.
I affirm that trade sales fell 1.8% in December. Likewise, he recognized collateral effects for this result of high inflation and high interest rates, for a January that was also unfavorable, according to his own consultations with his affiliates.
Commenting on other negative factors for consumption, he warned that the biggest alert now is the announced labor reform because it could affect growth, consumption and employment.
(See: What is the popular economy, the axis of the Government Development Plan).
Measures like the reduction of the weekly working day from 48 to 47 hours, the high increase in the minimum, the reduction of the daytime shift raises business costs. And if “to this we add the surprise that President Petro gave us that Saturday’s working hours will be extra, I don’t know which company is going to assume this extreme increase in labor costs, taking into account that in Colombia 93% are smes. That would have a devastating effect,” he asserted. In general, companies could face 30% to 40% higher labor costs compared to 2022,” he calculated.
Juan Camilo De Bedout, tax partner of Posse Herera Ruiz, in turn, said that the reform generates a “multiplicity of impacts and indirect effects” that will silently affect the tax and purchasing power of Colombian households.
For his part, Juan Daniel Oviedo, former director of Dane and an economic analyst, says that the moment the reform takes place is framed in an inflationary and exchange rate pressure, that – with the tax pressure, it has a worrisome mixture that opens the question about what will be the sources of growth in 2023.
Meanwhile, Camilo Herrera, CEO of Raddar, revealed that the first thing that households receive from the Tax Reform is a price increase that in January is very strong. To this, he said, we must add the financial costs that take away disposable income immediately. The return of the consumption tax and the hotel tax, for example, affects households, he pointed out. In other words, he says, in January the contraction of household spending in real terms of -1.6% compared to January last year. declared surprised because such a deep and rapid drop in that variable was not expected.
(Keep reading: For these reasons Colombia had a GDP of 7.5% during 2022).
Household spending fell in January
In line with the lower consumer confidence that Fedesarrollo has indicated, household spending decreased in January, according to Raddar. He decreased-1.59% compared to the same month last year and reached $80.92 billion. In the last 12 months it was $949.8 billion.
For Raddar, this decrease is mainly due to the inflation that has been hitting households’ pockets for several months, a lower placement of credits and the increase in debt service.
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