The legal setback for Gustavo Petro’s government following the fall of the Christmas economic emergency hides a pragmatic achievement: it only has to return 1.5% of the 1.7 trillion pesos (475 million dollars) collected under the Christmas economic emergency. The reason is legal, and tax law experts explain it from different angles. Lawyer Andrés Quitián goes to the core: “Consolidated legal situations cannot be altered,” he tells EL PAÍS. When a delinquent taxpayer paid their debts taking advantage of the discounts offered by the decree, it is a closed deal. And of the total, 447 million dollars correspond to the tax benefits offered to Colombia’s tax debtors.
Since the State promised a benefit and the taxpayer paid under that promise, the Court cannot undo it, nor force them to return what they saved, nor charge them what was forgiven. Quitián also recalls that this is familiar territory for Colombian jurisprudence: “Something similar happened with the taxes decreed during the internal unrest due to the Catatumbo situation,” adds the constitutional tax expert. Thus, what the Nation must return revolves around 25 billion pesos, according to the Ministry of Finance’s report on January 31, when it reported the current collection after the provisional suspension. The amount to be reimbursed corresponds to two specific items: 23.8 billion from the fiscal stability tax — 1% on the first export of coal or hydrocarbons — and an additional 1.2 billion for VAT on liquor imports.
The Court has given the entity 30 days to “establish the refund mechanisms,” but the numbers do not add up. The DIAN reports to EL PAÍS a total collection of 1.7 trillion, of which 1.6 trillion corresponds to tax reliefs that are not returned. The balance is 100 billion pesos. What are the remaining 75 billion, given that the amount to be returned is the reported 25 billion? The Ministry of Finance gives a clue in that same statement: about 165 billion more correspond to taxes paid by a citizen one day, and enter the DIAN weeks later. These are VAT on national liquors, consumption tax, and VAT on online gambling, which companies selling those goods or services collect and only pay in their bimonthly declarations, which fell in February and March. Before that came the Court’s provisional suspension, so it is possible that the missing amount lies in that universe.
To clarify the situation, EL PAÍS consulted sources inside the tax authority who responded that “there is still no clarity on the exact size of the refund.” Meanwhile, Eric Thompson, tax lawyer at the firm Cañón Thomson, adds spice to the matter. Today’s ruling, he says, creates a precedent that goes beyond the Christmas decree: “This also applies to those who took advantage of the reliefs of decree 0173, the tax decree of the second economic emergency — declared in February due to floods in eight departments — which is still under review by the Court,” he explains. “This gives even greater security to those considering taking advantage of those reliefs,” he concludes.
That decree is in force but under constitutional scrutiny. Its most controversial measure is the wealth tax for legal entities with assets exceeding 10.474 billion, which included 80 private universities among taxpayers. ASCUN estimated the impact on the sector would be 135 billion — equivalent to about 15,000 university places —.
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An operational challenge
In any case, returning what the Court demands faces operational challenges. Jaime Orlando Villabona, former director of the DIAN, breaks it down, starting with what can be processed easily: “In the case of the wealth tax for individuals, there will not be much inconvenience, since the deadlines started in May. Regarding the tax on vapers, it may be more feasible, since the taxpayer can be easily located and a credit can be generated for them or payments made,” he explains.
The problem, he says, comes with VAT. The Court ordered the money to be returned to the one who really paid it — the consumer — but it is not always easy to trace who that was. “If there is no electronic invoicing, it complicates things,” Quitián adds at this point. Villabona is more skeptical: “The companies that deposited the VAT would have to locate those customers who paid them and be able to return that money, which will be practically impossible.” Just imagine a person who, on a vacation trip in January, bought liquor in a neighborhood store hundreds of kilometers from their residence. How will they recover the VAT they paid?
Luis Carlos Reyes, former director of the DIAN, nuances the diagnosis: “The DIAN processes refunds all the time, every day, every year, so it is completely achievable.” For Reyes, “the Court is not asking for anything impossible,” although he points out that “the important thing is that taxpayers are very clear about their rights and that the tax administration does not present unnecessary obstacles.”
The ruling also settles the issue of the wealth tax for individuals. The Christmas decree intended to lower the entry threshold — from 72,000 UVT (3.77 billion) to 40,000 UVT (2.094 billion) — and raise the maximum rate from 1.5% to 5% for the highest wealth brackets. With its annulment, those rules are void. Individuals return to the regime of Law 2277, which means, according to Thompson, that the 105,000 people who would have become new taxpayers are “definitely out of its coverage.” However, the underlying problem does not disappear with any ruling. The Government needed 11 trillion to cover the gap left by the collapse of the financing law in Congress, and that deficit remains intact. “The Government’s fiscal gap will not be covered; this situation will worsen it and cuts will have to be increased, which will affect lower-income people more,” Villabona concludes.
