Colombia Pushes for New Tax Reform to Address Budget Shortfall

President Gustavo Petro’s administration is set to propose a new tax reform bill to Colombia’s Congress. Finance Minister Diego Guevara announced the plan on Caracol Radio, aiming to raise at least 12 billion Colombian pesos ($2.86 billion) in revenue.

This move follows the rejection of a previous fiscal reform proposal by Congress late last year. That setback forced the government to reduce the 2025 budget to 511 billion pesos ($121.79 million). Guevara emphasized the pressing need for new resources to address the country’s fiscal challenges.

The proposed reform may revisit elements from the rejected bill, including taxes on extractive industries and tax reductions for small and medium-sized enterprises. The government is considering a higher target to ensure longer-term fiscal sustainability.

President Petro faces limited congressional support, complicating the reform’s passage. The Autonomous Fiscal Rule Committee estimates that Colombia may need to adjust its expenses by an additional 40 billion pesos ($9.53 billion) this year to meet fiscal rules.

Petro defended the recent budget freezes, stating that local officials had agreed to them. He warned that if the new financing project fails, these adjustments would become permanent cuts.

The metro project, which saw the largest budget reduction, remains a point of concern. The success of this tax reform is crucial for Petro’s administration.

It will test the government’s ability to balance fiscal responsibility with its social and infrastructure goals. The outcome could significantly shape Colombia’s economic direction in the coming years.