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Colombia Passes Corporate Tax Cut

by Mike Godfrey, for, Washington

19 December 2006

Colombia's Congress approved contentious tax reforms last week which will cut headline corporate tax rates to 33% over three years from 38.5%, and abolish a 7% levy on repatriated profits. The bill now needs to be confirmed by the Senate.

President Alvaro Uribe, who was sworn in for an unprecedented second term in October, had vowed to continue pursuing the government's policy of pro-business economic reforms, including cuts in corporate tax and the conclusion of a free trade deal with the United States.

Uribe was elected to a second four-year term in May with a comfortable 62% of the popular vote. He is Colombia's first sitting president to be re-elected after the country's constitution was amended to allow him to stand for a second term.

"Our economic agenda is consistent with investors' trust, economic growth and financing social goals," the President stated in his inauguration speech.

A new annual wealth tax will be levied at 1.2% on people and companies with assets worth more than 3 billion Colombian pesos ($1.3 million); but the government had to give up proposals to increase some VAT rates.

For the economy at large, it would appear that the government's liberal economic polices are bearing fruit as central bank figures showed foreign direct investment hit a record $5.3 billion in 2005.

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