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Dow Jones, November 28, 2005

Colombia Government To Ask Congress To Cut Company Tax To 28.5%

BOGOTA -(Dow Jones)- Colombia Finance Minister Alberto Carrasquilla said Monday he will ask Congress to permanently lower the tax on corporate income to 28.5%, in an effort to boost investment.

Colombia has seen a rise in private investment because temporary exemptions on corporate taxes have lowered the real average tax level to 28.5%, Carrasquilla said. The official corporate tax rate is around 38.4%.

"The exemptions are temporary. We need a permanent solution if we want to encourage investment," he told reporters. "We all compete to attract investors."

Businessmen in Colombia have repeatedly demanded the government reduce the tax rate, which they claim is one of the highest in Latin America, to encourage both local and foreign investment.

According to the KPMG and Latin Business Chronicle Corporate Tax Rate Survey for 2005, the average corporate tax rate in Latin America is 29.5%. The survey puts Colombia's tax rate at 35%, in second place behind Honduras, with 36.25%.

However, corporate tax figures don't include other levies, such as labor costs, which push the overall tax rate higher in most countries.

Colombia's finance minister said he expects the new tax rate to be approved by Congress within two weeks.

Carrasquilla also said the government won't increase spending in the months before the presidential elections, scheduled in May 2006, pointing to the administration's track record of responsibility.

"We had been collecting more taxes than we expected. We could have spent that money on [election-related] politicking, but instead we preferred to reduce the budget deficit," Carrasquilla said.


-By Inti Landauro, Dow Jones Newswires; 571-600-1980; [email protected]

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