NewsLatin AmericaEntrepreneurs receive Gustavo Petro's tax reform with concern

Entrepreneurs receive Gustavo Petro’s tax reform with concern

President Petro with Bruce Mac Master, president of the National Association of Entrepreneurs (ANDI), in Cartagena.RICARDO MALDONADO ROZO (EFE)

President Gustavo Petro’s first meeting with the country’s businessmen took place amid noise. That of some statements by the Minister of Labor, Gloria Ines Ramirez, about the extension of the hours in which employers must pay a night surcharge, or the increase in overtime; that of others from the Minister of Mines and Energy, Irene Velez, on the possibility of importing gas from Venezuela, in the hypothetical case that it is missing due to the decision not to give more contracts to search for it; and the greater noise generated in the country’s private sector, a new tax reform, this time from the first government from the left in Colombia.

It was a week of a lot of cross information and expectation for the first steps of the Petro government. On Friday, after rumors about whether he would make it to the meeting, the president spoke before 2,000 businessmen who gathered to discuss the global and local challenges they face. True to the courteous spirit of Colombians, the public applauded the president, and some of the businessmen rose from their chairs to welcome him. The host, Bruce Mac Master, president of the National Association of Colombian Entrepreneurs (ANDI), told Petro that they could count on them, but he was clear about his fears. “I declare myself concerned (with the reform), because if we continue down this path we could make some fundamental mistakes for our economy,” said Mac Master.

He had already done so the day before before the Minister of Finance, Jose Antonio Ocampo, in charge of carrying out the fiscal reform that seeks to collect 25 billion pesos. Ocampo, who walked calmly and smiling through the corridors of the Cartagena Convention Center, is respected by many businessmen. He has been the teacher of several of them, including Mac Master himself. Ocampo’s presentation, the advance guard at Petro’s arrival, was listened to carefully but not without criticism. The minister told the businessmen that the collection goal is unchangeable and that, if they wanted to “preserve privileges of the tax system”, they should make alternative proposals.

In this initial meeting between the business community and the Government, the only public expression was applause. Ocampo received a shy one at the end of his presentation. “For me he was not so shy. He was very good, obviously with the disagreements that exist, “he told EL PAÍS before Petro’s arrival. One of those disagreements was visible when Mac Master exposed that the project would collect $16 billion from companies, so it would fall on them and not on natural persons. From his chair in the audience, Ocampo waved, said it wasn’t true, that he didn’t agree. Then, teacher and student, met in private.

“As I pointed out in my presentation I don’t want to be told just what’s wrong, but what to do then. As I told a friend, instead of criticizing me so much, tell me how to make high-income natural persons in this country pay taxes. This is one of the most unequal countries in the world,” he told this newspaper. The reform seeks to collect through taxes on people with incomes of 10 million pesos a month or more (about 2,400 dollars), on financial and extractive sector companies, and on sugary drinks and products that are contrary to the environment. Ocampo addressed the businessmen suggesting that among the public was the 2 percent of the Colombian population that earns more than 10 million pesos. Among the attendees were politicians such as opposition senators Miguel Uribe, Paola Holguin and Paloma Valencia.

Although publicly many businessmen are cautious and in expectation of the improvements of the reform that still has to make its way through Congress, their anxieties were evident in the huddles of the Convention Center. Representatives from the oil sector, as well as those from the food and health sector, are among the most concerned. But all prefer to say that they are doing accounts to know the impact of the reform.

Petro also did not give them many details in his presentation, although he did tell them that for his government “the heart of generating wealth is production” and that “producing is agriculture and industry.” In his exposition, the president divided the companies between those that are dedicated to production and those that are “transferors of wealth”, which would be those of services such as banking or commerce.

“Wealth is work. A country that has the capacity to work is richer. So the question arises: does all work generate wealth? The discussion is pertinent because a limit between what is and is not a generator of wealth, but merely a transfer of wealth, is production. Wealth is generated in production. There are activities that are not productive, but are necessary for production to exist, but those activities in themselves are not wealth generators,” he assured an audience where representatives of service sectors were present that would not be wealth producers in that conception.

The president drew applause at times, such as when he said that there has been no industrial policy in Colombia for decades, but, for some, his presentation in which he said that agrarian and tax reforms are necessary left a bad taste. And the need for more details on tax reform, although that task was undertaken by Ocampo.

disagreements

One of the concerns that appeared from the first day of the business congress, on Wednesday, is that the tax reform “disincentivizes investment”, as Mac Master said, representing the voices of the companies that avoided speaking directly. Neither Ocampo nor his colleague from Industry and Commerce, German Umaña, see it that way. “What does that have to do with investing? What is being proposed here is progressive reform. What is happening in Colombia right now? We have a Gini coefficient of 52% and after (applying) taxes it drops to 50%. That is, inequality continues. So, what there is is a misuse of taxes,” said Umaña.

“If inequality decreases, demand increases and this will encourage foreign investment,” he added after meeting privately with businessmen.

Another of the concerns that flew over the congress were the statements of the Minister of Labor, Gloria Ines Ramirez. In the corridors and the cocktail party of the event, there was talk of the fear that the increase in overtime hours would reduce labor competitiveness and encourage informal work.

Mac Master told Petro that businessmen see the country’s development in two-lane highways: the social component and employment opportunities. “If we concentrate on only one of the lanes, we will not be able to generate income or have business development dynamism,” he said, asking for signs of confidence. “That is why we carry out analyzes on legal stability, labor and tax competitiveness.”

In addition to these general fears, various sectors have some particular ones. For example, Minister Ocampo assured that “the free zones export or they are not.” A businessman from one of them, who closed an agreement for thirty years, said he feared that the conditions would change with the reform and underlined the importance of legal certainty. Others assured that they generate employment, although they do not export. A group of them met with the minister, who said the meeting was a success.

There is not only concern among large companies; also among the small and medium-sized entrepreneurs who came to the congress to listen. “They had said that there would be a differential tax for small and medium-sized companies and that they would seek reactivation, but the reform project raises taxes from 33 to 37 percent. So, instead of a relief for us who generate 80 percent of national employment, we see that we are going to receive a blow,” Alfredo Castellanos, president of the board of directors of the Colombian Association of Micro, Small and Medium Enterprises (Acopi). “It is not fair that a mega-company that earns billions of pesos pays the same rate as one with 10 employees and 300 million pesos in sales in the year.”

With an ambitious reform on the way, this probably won’t be Petro’s first face-to-face with businessmen. They asked him not to “stigmatize any sector or businessmen” and to count on them. “For us it is very important to have signs of trust that allow us not only to be in Colombia, but also to increase our participation and presence and be able to produce more opportunities,” concluded Mac Master, in a sentence that reveals that trust is barely be built.

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Source: EL PAIS

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