BOGOTA (Reuters) – Colombia’s tax collection will fall by 10% this year, equivalent to 15.8 trillion pesos ($3.9 billion), because of the economic impact of the novel coronavirus, said Finance Minister Alberto Carrasquilla.
The prediction is an increase on the 6% estimate Carrasquilla gave last week.
“We have an extremely grave economic situation. This has direct repercussions on our capacity and our estimates about how many tax resources the country will have,” Carrasquilla said during an online congressional debate late on Tuesday night.
“You’ll remember we were estimating 158 trillion pesos in income for 2020, but if we apply a simple and modest conversion to the new reality in terms of growth, that gives us a decrease on the order of 10% in collection,” he said.
Many companies and people will be unable to pay their taxes because of the semi-paralysis of the economy during a nationwide quarantine set to end on May 11. Colombia has more than 4,000 confirmed cases of coronavirus and nearly 200 deaths.
Business leaders’ commercial confidence fell precipitously to -30.8% in March, according to a survey by think tank Fedesarrollo released on Wednesday, from 28.3% in February.
The survey’s industrial confidence measure was down to -35% last month from 9.8% in February.
Both the commercial and industrial figures are the lowest ever recorded in their categories by the four-decade-old survey.
Carrasquilla said last week it was possible the country would need tax reform to help it confront income issues caused by the pandemic, but President Ivan Duque later ruled out reform in the near term.
The government is reviewing its projection of economic contraction this year, Carrasquilla said, and it could be more than the predicted 1.6%.
“That number seems a little optimistic now, we are reviewing it,” he said.
The International Monetary Fund projects Colombia’s economy will contract by 2.4% in 2020. The country will still perform better than many of its neighbors – the IMF predicts Latin America overall will contract 5.2% this year.
Colombia’s Fiscal Rule Advisory Committee last week widened the government deficit limit for this year to 4.9% of gross domestic product, up from 2.2% of GDP previously.
(Reporting by Nelson Bocanegra, additional reporting by Carlos Vargas; Writing by Julia Symmes Cobb; Editing by Steve Orlofsky and Jonathan Oatis)
