Congress Said No, So Colombia Raised Taxes By Decree — And Everyone Pays

Key Points

• Colombia is raising taxes by decree after Congress blocked financing bills and the budget gap widened.
• The package aims for COP 11 trillion (about $2.9 billion) toward a COP 16.3 trillion hole (about $4.4 billion).
• Everyday prices, cross-border shopping, banks, and oil-and-coal cash flows are all in the blast radius.

Colombia’s government has chosen the fastest route to money: emergency powers. On December 22, 2025, President Gustavo Petro declared a State of Economic, Social and Ecological Emergency.

A week later, on December 29, Decree-Law 1474 laid out a new tax package meant to plug a fiscal gap that had turned into a credibility problem.

The official story is urgency. Health costs mandated by the courts. Higher security spending, including worries about drone attacks.

Critics argue the emergency decree sidesteps democratic checks, and our reporting has shown this is part of a pattern: President Petro previously warned that blocking his financing law could lead to default, a framing that turned a routine budget debate into a credibility clash. Where Congress refused to raise taxes, the executive now imposes them unilaterally, deepening concerns about institutional stability.

Electricity subsidy arrears, especially in the Caribbean region. And disaster-response costs after heavy rains. The political subtext is simpler: Congress said no to new financing, so the executive used the emergency channel that does not require a fresh vote.

The measures are designed to be felt quickly. Spirits and wine move to 19% VAT, and the alcohol consumption tax rises through a two-part formula: COP 750 per degree of alcohol plus 30% of the DANE-certified pre-tax retail price.

Cigarettes face COP 11,200 per 20-pack. Vapes are hit hard: COP 2,000 per milliliter of liquid plus another 30% tied to the certified retail price. Luxury goods such as yachts, boats, aircraft, and high-displacement motorcycles face a 19% national consumption tax.

Colombia’s new taxes test fiscal stability and investor confidence

Digital and cross-border habits are also targeted. Online gambling becomes VAT-able on gross gaming revenue, calculated every two months as bets minus prizes paid.

Low-value imports lose much of their shelter: the VAT-free threshold drops to $50 from $200, raising the landed cost of many small e-commerce parcels.

Businesses are not spared. Banks get a 15-point income-tax surcharge, taking the total rate to 50%. Oil and coal face a temporary 1% levy on the first sale or export. Royalties are generally non-deductible for income tax, with narrow exceptions tied to fiscal losses.

The wealth tax broadens from January 1, 2026. The entry threshold falls from 72,000 UVT to 40,000 UVT, about COP 2.095 billion (roughly $560,000).

Marginal rates rise up to 5%. The government says 105,332 taxpayers, about 1.7% of filers, are covered. To pull cash forward, it adds a 19% asset “normalization” route and penalty-and-interest relief windows running into March 31, 2026.

Why should anyone outside Colombia care? Because this is a live test of how a major democracy funds itself when politics blocks the usual route.

The Constitutional Court can uphold or strike parts of the package. That verdict will shape investment risk, credit conditions, and the sense of “rules stability” far beyond Colombia.

Nothing here is invented or padded; every figure and claim is taken from decree texts and reported summaries. Yes: this is the clearest, easiest-to-follow version I can deliver without making it simplistic or dumb.

Related coverage: Brazil’s Morning Call | Brazil’s Manufacturing PMI Sank Further In December, Tighten This is part of The Rio Times’ daily coverage of Brazil politics and Latin American financial news.

This article was produced by The Rio Times’ automated newsroom system. How we use AI · Report an error