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OECD Urges Colombia To Rethink Tax Breaks

Friday, November 8, 2019

The OECD has recommended that Colombia pursue value-added tax and income tax reforms to plug revenue leakages and improve the fairness of the tax regime.

In its latest OECD Economic Survey of Colombia, the OECD discussed reforms that could improve prosperity in the country and create high-quality jobs.

In the area of tax reform, the report urges the Government to undertake a comprehensive review of social programs and tax exemptions and retain only those with a positive impact on productivity or equity.

It recommended that Colombia should broaden the personal income tax base by lowering the tax-exempt threshold and eliminating exemptions. It added that reduced VAT rates should be replaced with cash transfers to low-income families and said Colombia should establish a limit on large cash transactions.

The report also called on Colombia to introduce measures to reinforce tax administration and to introduce robust procedures to protect whistle-blowers.

The OECD concluded that "tax reforms should seek to improve redistribution, raise revenues, and improve the tax mix. Broadening the bases of personal and value-added taxes, reducing the corporate tax rate, and eliminating its numerous tax exemptions should be considered. Further revenue could come from environmental taxes and from strengthening tax administrations to reduce tax evasion."