Colombian government has agreed to revise its oil and mining tax reform proposal

    photo:Reuters

BOGOTA: Colombia's government agreed on Monday to modify a tax reform proposal under debate in congress and continue to allow oil and mining companies to deduct royalty payments from their taxes in the wake of a wave of industry criticism.

The government has agreed to back continued royalty deductions in exchange for raising income taxes on extractive industries by 5% and increasing an export tax to 20% for oil and coal sold above certain threshold prices, Finance Minister Jose Antonio Ocampo told journalists.

Colombia's new leftist president, Gustavo Petro, has said he wants to raise 25 trillion pesos (about $5.6 billion) in tax revenue by 2023, eventually adding $11.5 billion a year to government coffers for social programs.

However, producers who claimed that the provisions could render investment unviable strongly criticised the provisions that would have precluded energy corporations from balancing taxes with royalty payments.

"The non-deductibility (of royalties) of the agreement will be exchanged for an additional 5 income tax points. It is a surcharge, similar to those in the financial sector "Ocampo, the finance minister, stated.

Instead of the previous $48 per barrel, the new threshold for the oil export tax will be $71 per barrel.

The duty will be applied to coal exports when the price is higher than the 20-year average, however Ocampo did not provide a specific amount.

As originally intended, the scheme will not include gold exports.

Ocampo warned that the change might not result in an increase in revenue of 25 trillion pesos the following year, but he did not elaborate.

Meanwhile, a plan to hike gas taxes will be dropped, and further legislative alterations are anticipated for next week.

The reform would boost taxes on anyone who make more than $2,259 per month, or almost ten times the minimum wage, and eliminate exemptions. Thousands marched earlier on Monday to demand revisions to the reform.