Colombia’s Top Court Strikes Down Petro’s Emergency Tax Decree, Orders Refunds

Petro took a political bet that the economic emergency would stand, and that the fiscal stability tax on coal and oil exporters would force Colombia’s new revenue floor upward before the May 31 presidential election. The Court just rejected the premise. Now the bill comes due—politically and fiscally.

The Colombia Constitutional Court Petro ruling issued Wednesday is the most consequential judicial setback for the Petro administration’s fiscal agenda and arrives in the middle of a broader institutional confrontation with the country’s independent central bank. The Rio Times, the Latin American financial news outlet, reports that the Sala Plena voted 8-0 (with Justice Jorge Enrique Ibáñez recused for impartiality concerns) to nullify Legislative Decree 1474 of 2025, the operational tax package that had been the fiscal core of Petro’s December 22 emergency declaration.

What Gets Refunded and What Stays

The refund order covers approximately COP$25 billion collected during the decree’s effective period of December 30, 2025 through January 28, 2026—when the Court imposed a precautionary suspension. The largest component is COP$23.8 billion from the “fiscal stability tax”: a 1% levy on the first sale or export of coal and hydrocarbons. The smaller component is COP$1.2 billion from 14 additional percentage points of IVA applied to imported liquor.

Critically, the Court preserved the legal standing of taxpayers who took advantage of debt-forgiveness benefits under the decree, allowing the Treasury to retain COP$1.63 trillion collected from roughly 175,000 taxpayers and customs users who settled old DIAN liabilities in exchange for reduced penalties and interest. The direction was decisive: direct taxes accrued under the decree cannot be declared, calculated, or collected, and indirect taxes already paid must be refunded on proof of payment. DIAN Director Lisandro Junco and University of the Andes tax specialist César Camilo Cermeño both emphasized that the operational mechanics of the refunds are now the DIAN’s responsibility to design.

The Constitutional Argument

The core legal finding matters beyond this cycle. The Court ruled that the Executive cannot invoke Article 215 emergency powers to substitute for legislative prerogative on tax policy, and that Congressional rejection of a tax reform bill forms part of the constitutional balance of powers rather than a justification for emergency intervention. The language from the April 9 decision carried forward: “the failure of a tax reform in Congress does not justify declaring a state of exception.”

This is the constitutional doctrine that will matter for the next administration regardless of who wins the May 31 election. It effectively forecloses the use of economic emergency decrees as a workaround after legislative defeats—a tool that every Colombian administration since the 1991 constitution has occasionally flirted with. The Attorney General’s office had recommended preserving some revenue for the health system; the Court rejected that partial carve-out, ruling that health-system stress does not meet the constitutional test of imprevisibilidad and excepcionalidad.

Petro’s Reaction and the Benedetti Attack

Petro responded on X Wednesday afternoon with a claim that the struck-down taxes “were not collected, so there is nothing to return,” arguing that most of the money collected during the decree came from pre-existing DIAN debtors who accessed tax benefits rather than from new emergency taxes. The claim is partially accurate (the COP$1.63 trillion in debt-forgiveness benefits is genuinely not subject to refund) but misleading on the specific refunds ordered: the COP$23.8 billion coal and oil tax and the COP$1.2 billion liquor IVA were in fact collected, and are in fact subject to the Court’s refund order.

Interior Minister Armando Benedetti attacked the Court directly: “The Court doesn’t want taxes imposed on the rich and protects them quite a bit. The Court has a political hatred against the government.” The attack mirrors the administration’s simultaneous confrontation with the Banco de la República over the 11.25% benchmark rate, where Petro has called the rate decision “stupidity,” “fascism,” and “economic genocide.”

Why This Matters for Markets and the May Election

The fiscal arithmetic is now worse for Colombia: the government originally sought COP$11 trillion from the emergency package, but the effective yield ends up at COP$1.63 trillion in debt-forgiveness settlements—a one-time revenue event, not a sustainable revenue stream. Combined with the suspension of debt limits earlier in 2026 and the widening of the projected primary deficit to 2% of GDP, the ruling reinforces why Public Credit Director Javier Cuéllar is racing to complete his US$4 billion external bond buyback and unwind a US$9.3 billion Swiss franc swap before the May 31 presidential election.

The doctrinal precedent set by Sentences C-075 and C-079 of 2026 matters for whoever wins that election: the constitutional path to revenue-raising now runs exclusively through Congress, which is the political reality Petro had attempted to bypass with the December 22 emergency declaration that just collapsed 8-0 in the Court.

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