The Same Tax, a New Excuse
Petro announced the decree Monday night on X, framing it as a matter of justice. Bank profits, he argued, have surged not from real economic growth but from interest rate hikes by the central bank. “Taxing these windfall profits has become a sin,” he wrote. “It is the fairest thing that can be done.”
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The decree includes a surcharge raising financial institutions’ income tax rate from 35 to as high as 50 percent, plus a wealth tax on corporations estimated between 0.6 and 1.2 percent of high-value holdings. The target: over 15,000 companies. The stated goal is 8 trillion pesos ($1.8 billion) to fund reconstruction in Córdoba, Sucre, Bolívar, and five other departments where floods have killed at least 14 people and displaced 69,000 families.
Second Try, Same Fight
In late 2025, Petro’s government failed to pass a financing bill that would have raised roughly $4 billion for the 2026 budget. On December 22, during the court’s holiday recess, he issued his first emergency decree — Decree 1390 — authorizing the government to raise taxes without congressional approval. The justification cited budget deficits, health system debts, and security threats from rebel drone attacks.
The Constitutional Court suspended it in January, ruling the cited reasons were not unforeseen emergencies as the constitution requires. Business association president Bruce Mac Master called the original decree “a flagrant abuse of the rule of law.” The new version attempts to solve that legal problem by anchoring itself to the flood disaster — an event the government argues meets the constitutional threshold of an extraordinary crisis.
The Math and the Risk
Anif, one of Colombia‘s leading economic research institutions, calculated the proposed wealth tax could generate up to 13.4 trillion pesos ($3 billion) — above the government’s target. But the same analysis warned of consequences. Adding that to the 70.6 trillion pesos corporations already paid in income tax in 2024 would push the effective rate from 29.8 to 35.5 percent. That 6-point increase, Anif argued, constitutes double taxation, reduces incentives for growth, and discourages new capital in a year when private investment has already hit historic lows.
A Court Will Decide Again
The decree gives the government 30 days to issue tax measures with the force of law, but the Constitutional Court must validate them. Given the same court struck down the December decree, the outcome is uncertain. Colombia holds elections in 2026, and Petro’s leftist coalition faces an opposition emboldened by the fiscal standoff. The fundamental question has not changed — whether a president can tax by decree what Congress refused to tax by law. The floods give Petro a stronger case. Whether the court finds it strong enough will determine if Colombia’s fiscal gap gets filled or widens further.
For more context, read Brazil’s Morning Call and the USD/BRL exchange rate report.
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