The Colombian government’s plans to push for a series of tax increases to preserve the country’s investment grade status appeared to hit a snag this week when a leading political party questioned whether the time was right to implement tax hikes.
The Liberal Party, which has often supported the policies of President Juan Manuel Santos, issued a statement urging the government to reconsider submitting a tax reform plan to congress.
“Now is not an opportune time,” the party said. “Again, we recommend that the government not submit this to Congress.”
However, lawmakers from the party said they will study any proposal put forward by the government.
Finance Minister Mauricio Cárdenas is working to lay the political groundwork for the tax plan, which aims to make up for a drop in government revenue due to low oil prices. In a recent interview with LatinFinance, Cárdenas expressed confidence a tax reform bill will eventually win congressional approval to help Colombia maintain its BBB investment grade credit rating and fund anti-poverty programs.
Investors have been concerned about the government’s ability to push through any tax reform proposal after Colombians earlier this month voted to reject a peace plan with the Revolutionary Armed Forces of Colombia (FARC). Some analysts have raised the possibility the government may seek to water down its reform plan.
Cárdenas has pointed to the government’s recent success getting lawmakers to approve a hike in liquor taxes as proof the government will be able garner political support for the tax reform plan.