Tax Collection Struggles in Colombia: A Closer Look at the Economic Impact

Colombia’s tax agency, DIAN, collected 28.2 trillion pesos (US$5.64 billion) in September. This amount was 900 billion pesos more than the same month last year. Despite this 3.2% increase, inflation ate away the gains.

The tax collection for the year so far remains weak. From January to September, DIAN collected 206 trillion pesos (US$41.2 billion). This marks an 8.1% drop compared to the same period in 2023.

Lisandro Junco, former DIAN director, explained the situation. He said that tax collection is not growing but actually shrinking by 2.54%. The inflation rate of 5.81% has absorbed any nominal growth in tax revenue.

Experts are worried about the impact on Colombia‘s fiscal rule. Camilo Pérez from Banco de Bogotá pointed out a significant shortfall.

He estimates the deficit could reach 12 trillion pesos (US$2.4 billion) by year-end. September’s tax calendar is usually more fruitful than August’s.

It includes VAT payments and the second installment of wealth tax. Despite this, the collection remains disappointing. Sales taxes were the biggest contributor in September.

They brought in 10.08 trillion pesos (US$2.02 billion), making up 35.8% of the total. Income tax withholdings followed with 7.9 trillion pesos (US$1.58 billion).

DIAN has been trying to boost collection through various means. These include coercive collection, persuasive collection, and extensive control actions.

These efforts have yielded 33.37 trillion pesos (US$6.67 billion) so far. Most of the collected taxes go towards paying the national public debt.

Education, health, and defense also receive significant portions. Agriculture, housing, and equality sectors get the least funding from tax revenue.

The struggle in tax collection raises questions about Colombia’s economic growth. It also puts pressure on the government’s ability to fund essential services and maintain fiscal stability.

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