Investors balk as Petro takes aim at Colombian extractive industries
The government of Colombian President Gustavo Petro is moving forward with new taxes on oil and coal companies in the face of conterted opposition from industry groups, the FT’s Joe Parkin Daniels reports. The new levies are part of a broader tax bill needed to fund the government’s ambitious agenda that includes redistributing land and ending oil and gas exploration. Opponents warn that the taxes risk scaring away new investment in the sector that accounts for nearly half of Colombian exports.
The tax reform bill aims to raise 21.5 trillion pesos ($4.7 billion), nearly half of which would come from oil and coal companies through a surcharge on corporate income tax and the cancellation of a statute that allowed royalty payments to be deducted from their tax bills. Colombia’s tax chief told the FT the government “want[s] the industry to continue to exist for the time being,” but that it is “far more interested in incentivising those sectors that will help us transition into green energy, and all of the industries that are tied with it.” The 2023 budget saw a 62.6% increase in subsidies for agriculture—Petro’s chosen alternative to extractive-led growth.
Colombia has seen an uptick in capital outflows as concerns grow over potential balance of payments stresses. The peso has become one of the world’s weakest performers, dropping 7% last week for a cumulative 20% fall in 2022.
