New taxation scheme for liquor in Colombia sparks controversy

The Colombian congress presented an initiative to raise taxes on imported liquor, the move has its detractors and its supporters.

The Colombian senate introduced a proposal to restructure taxation regarding alcoholic beverages. With the goal of collecting resources for health, sport and education nationwide, as well as combating counterfeit alcohol, the proposal plans on

Under the current taxation scheme, liquor that has under 35% alcohol pays a 306-peso tax for each percentage, whereas those above 35% pay a 502-peso tax for each percentage.

Aguardiente, the nation’s bestselling hard liquor, produced locally, contains below 35% alcohol in any of its presentations. Whiskey, vodka and gin, among many other imported liquors, contain well above 35% alcohol. This means that the tax burden falls upon imported liquors much more heavily than it does upon locally produced beverages.

The new proposed tax scheme would do away with this uneven fiscal burden. It proposes a flat 220-peso tax per percentage alcohol, and an additional tax comprised of 25% of the final price value.

The proponents of the tax reform expect that this new scheme will collect more resources for regional governments, as taxes on alcoholic beverages will generally be higher across the board thanks to the 25% tax imposed on the products final price. Finance Minister Mauricio Cardenas assures that regional governments will be raking in 20% more tax money from alcohol sales under this new scheme.

Those who oppose the reform argue that it strips away protection for local distilleries, allowing foreign companies to take market shares away from them, as they will now compete with more or less equal taxation.

Another argument against the reform is that it will incentivize bootlegging and contraband. Since all alcoholic beverages will now be sold at a higher price due to taxation, bootleggers, which naturally don’t account for taxes in their prices, will have an even more attractive product.

The debate wages on inside the Colombian senate. The proposal’s future was supposed to be clear by now, but the irruption caused by the historic peace deal with the FARC guerrilla means it will be postponed until Monday the 3rd of October.

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