Colombia’s national merchants’ federation has backed the need to repair the public finances while calling for changes to a government tax and spending bill. The group argues that the cost of adjustment should not fall solely on consumers, shops and the executive branch.
In a statement published on 3 November, Fenalco, led by Jaime Alberto Cabal, called for a voluntary austerity pact across public institutions. It also asked for a review of measures affecting neighbourhood shops, electric and hybrid vehicles and farming supplies.
The Economic Rescue Bill was filed in Colombia’s lower house on 29 October. It is at the committee stage, not law, and its provisions could change as Congress scrutinises them. The government’s plan combines spending restraint with tax changes and measures intended to raise revenue.
A wider austerity pact
The filed bill proposes a 50 per cent reduction in the cost of contracts for professional and management-support personnel within Colombia’s national budget in 2027, compared with the previous year. It also proposes a 20 per cent nominal fall in personnel spending in 2028, excluding members of the security forces. The government says around 70 per cent of its proposed fiscal adjustment would come from state measures, including spending reductions. These are proposals and objectives, not achieved savings.
Fenalco wants other branches of the state, not just the executive, to sign a voluntary pact. It proposes savings of at least 20 per cent in the operating and spending budgets of several institutions over four years, starting in 2027. The federation’s proposed pact and the government’s spending plan are not identical in scope.
The bodies it wants to involve include Congress, the judiciary, the public prosecutor’s office, the national audit authority and the electoral registry. The federation also wants stronger action against tax evasion and corruption to protect public resources. Its call does not establish that any of those bodies has signed an agreement.
Support for some tax measures
The federation has welcomed the proposed VAT refund for people on lower incomes. The government’s plan envisages returning VAT to millions of Colombians, with a new system envisaged for 2028 and an advance payment proposed for late 2027. The scheme’s final scope and operation would depend on the legislation.
Fenalco also supports removing the low-value import VAT exclusion, citing purchases from Chinese online platforms. It sees the change as a way to reduce differences between foreign platforms and domestic merchants. The filed bill would repeal the specific exclusion for qualifying low-value imports, but other product-specific VAT exclusions or exemptions would not necessarily disappear.
Not every low-value parcel currently qualifies for the exclusion. Colombia’s tax authority says the VAT relief for postal or express shipments with a free-on-board value of no more than US$200 applies when they come from countries with a free-trade agreement expressly requiring the tax not to be charged and the shipments are not for commercial use. A purchase is not automatically exempt simply because it is below that value or comes from a Chinese platform.
Fenalco estimates that VAT on the purchases it describes could bring in more than 1.8 trillion Colombian pesos. That is a projection by the business group, not revenue already collected or an independently established outcome.
Concerns over shops, vehicles and farming
The association is less supportive of the continuing levies it describes as ‘healthy taxes’. It wants them reconsidered because it believes they add to the cost of everyday goods and put pressure on small shops and poorer households. The association had already called for a review of healthy taxes at a retail convention before its latest statement. It also objects to the treatment of beer taxation, warning that it could squeeze shopkeepers’ margins.
The filed bill would rename the existing consumption tax on beer a production tax without changing its legal nature. Consumption in Colombia would remain the taxable event. The bill would also change how the tax is calculated, with a price-based component and, for beer containing alcohol, a separate component linked to alcohol content.
A separate proposal would raise VAT on hybrid and electric vehicles. Fenalco says the vehicle rate would rise from 5 to 19 per cent and could discourage purchases of cleaner technology. The effect on purchasing would depend on how people and businesses respond.
The proposed treatment of agricultural inputs is another concern. The federation argues that removing VAT advantages for goods used in farming could increase production costs and create pressure on food prices. These are the group’s warnings about potential effects, not measured outcomes.
The bill also proposes reducing the general corporation tax rate from 35 per cent to 33 per cent in 2027 and 31 per cent from 2028. That is a separate part of the package and, like the measures questioned by Fenalco, remains subject to the legislative process.
Cabal has welcomed the government’s willingness to hold technical discussions with affected sectors, where alternative tax proposals can be raised. Such discussions could give the association a chance to argue for changes; they do not show that ministers or lawmakers have accepted its proposals.
For shoppers and businesses, the eventual outcome will depend on whether Congress passes the bill, what form it takes and when any measures come into effect. The federation’s intervention shows that support for addressing Colombia’s fiscal position does not mean support for every tax in the government’s plan.
