By Álvaro Grajales
Less than 24 hours after taking office, the president of Colombia, Gustavo Petro, filed his tax reform. The document, loaded with data and rigged arguments, allows us to take a glimpse of the ideology of the new administration.
The reform reveals the total disrespect that Petro and his entourage have for private property and freedom. Raising taxes in a recovering economy, but with unemployment and inflation on the rise, is to apply gasoline to a bonfire in an unintelligent attempt to extinguish the fire.
With the elimination of tax exemptions and benefits, the effective income tax rate for companies would be closer to 35%, added to the 20% tax on dividends, the 30% occasional profit tax, and the wealth tax; the Petro Administration would be succeeding in materializing one of the premises of socialism: to put an end to private capital.
Without capital, there will be no innovation, development, and new companies, which will result in unemployment and poverty. Not to mention that there will be a capital flight to economies with lower tax rates and more legal security, such as Uruguay, for example.
Another point to take into account is the threat of the non-exploration and exploitation of hydrocarbons, which would reduce their supply, while demand remains constant, threatening energy sovereignty. This measure would generate a price increase in many goods and services, such as food, since it would be more expensive to transport food, a cost that the final consumer will bear.
However, food will not only be expensive due to the costs associated with the increase in gasoline for the reasons mentioned above. Many foods, such as soups, will have a 10% increase due to the consumption tax. Yet, this spike does not end there, as we have to remember inflation, another factor that affects the price of food.
With this, we could affirm that in January 2023 food would be costing more than 20%, endangering the purchasing power of millions of Colombians. The measures that the new government may take are much more distressing, and it is most likely that it will resort to the old recipes of 21st-century socialism: subsidies, populist increases in the minimum wage, and price controls. With that, Colombians will be in a downward spiral of bad decisions that will make us poorer.
Advances in multimodal poverty have us in a better position than countries like Argentina, Spain, Nicaragua, Venezuela, and Cuba (all socialist nations), and even better than Belgium.
World Bank data on poverty, 2020.
But one of the most rigged arguments is that of monetary poverty, since they use data from the year 2020, that is, in the middle of the pandemic, ignoring the progress made in previous years and the post-pandemic recovery.
World Bank data on monetary poverty in Colombia.
Among deceit and populism, a damaging tax reform will be processed and eventually passed with the approval of the Conservative, La U, and Liberal parties, who sold out for a position in the Petro administration.
Small stores, hairdressers, and similar businesses will have to pay a tax of 2% of their income, even if they’re not profitable. How many shopkeepers will go bankrupt?
The president of the National Association of Industrialists (ANDI), Bruce Mac Master, announced that they are studying the reform. Will they raise their voice in protest against the spoliation, or will they seek benefits for themselves, leaving the rest of Colombians behind?
The moment we let the state tell us what to eat under the argument of protecting our health, we will be opening the door to totalitarianism so that they can tell us what to think, what to wear, how to speak, and how to act under the excuse of our benefit.
