Colombian Government Urges Congress To Cut Corporate Tax

by Mike Godfrey, Tax-News.com, Washington

01 December 2005

The Columbian government is calling upon Congress to permanently lower the rate of corporate tax in an effort to attract more businesses and higher levels of investment to the country.

While the official corporate tax rate in Columbia is currently about 38.4%, temporary exemptions on corporate taxes have lowered the actual rate to 28.5%, a move which has led to rising levels of investment and which Finance Minister Alberto Carrasquilla wants to see made permanent.

"We need a permanent solution if we want to encourage investment," Mr Carrasquilla told reporters on Monday, noting that Columbia finds itself in a competitive environment with other Latin American states which are also seeking to attract foreign business.

Businesses have repeatedly begged the government to reduce the tax rate to encourage both local and foreign investment in the country. According to the KPMG and the Latin Business Chronicle Corporate Tax Rate Survey for 2005, Columbia's corporate tax rate, which KPMG put at 35%, is second only in the region to Honduras, where corporate tax is 36.25%.

When the tax-cut was first announced in August, the minister said that the new tax reform package will also seek to abolish the 7% tax on profits repatriated by foreign firms based in Colombia. In addition, an unpopular tax on bank transactions will be reduced under the tax reforms.

Mr Carrasquilla stated that he expects the new tax rate to receive Congressional approval in the next two weeks.

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