Protests in Colombia derail an important tax reform


FOR THE past week protesters have defied an 8pm curfew, and the risk of catching covid-19, to take to the streets of Bogotá, Colombia’s capital. They have burned buses and police stations and looted banks and shops. One of the main roads leading to Cali, the country’s third-largest city, has been blocked, resulting in empty shelves at grocery shops. Even Medellín, where protests rarely happen, has been affected by looting. At least six people have died and nearly 400 civilians and police officers have been injured. On May 1st Iván Duque, the president, deployed the army to quell the violence.

The protests were triggered by a tax-reform bill the government sent to Congress on April 15th. On May 2nd the protesters seemed to achieve their aim: Mr Duque withdrew the unpopular bill. The next day the finance minister, Alberto Carrasquilla, resigned. But resentment at the president, who currently has approval ratings of 33%, means that unrest is likely to continue. More protests are due for May 5th.

Mr Duque’s reform was sorely needed. His government needs more revenue. Because of the pandemic, Colombia’s deficit has tripled to nearly 8% of GDP. Public debt could reach 108% of GDP in ten years. The reform would have removed many VAT exemptions and reduced the threshold for starting to pay income tax, from which revenues are among the lowest, as a share of GDP, in the OECD, a club of mostly rich countries. Pensions would have been taxed, too. Spending on social programmes would have increased, potentially benefiting 19m people. Mr Carrasquilla claimed the bill could have reduced the share of Colombians who are extremely poor (anyone who earns less than 145,004 pesos a month, or $38) by six percentage points.

Most Colombians, however, saw it as unfair. One of the longest lockdowns in the world has emptied wallets and sapped morale. Since last year 2.8m people have fallen into extreme poverty. More than 500,000 businesses have closed. Even though the tax increases would have hit the wealthiest hardest, many feel that it is not the right time to raise taxes. Fully 80% opposed the bill.

The bill was not the protesters’ only grievance. Colombians are frustrated, particularly with Mr Duque. The president promised to make the country safer. But violence is getting worse. Colombia is exporting record amounts of cocaine—it still provides around 70% of the world’s supply. Meanwhile illegal armed groups are growing stronger. Since 2016, the year a peace deal was signed with the FARC guerrillas, the remaining groups have driven a growing number of rural Colombians out of their homes and murdered hundreds of social leaders. Colombians, like many people elsewhere, also blame their government for mishandling the pandemic, which is rampaging through the country. Just 7% of the population have had a first jab of the vaccine.

Mr Duque is weak politically—unlike his predecessors, he does not have a stable majority coalition in Congress. Even his mentor, former president Alvaro Uribe, has distanced himself from Mr Duque; he was one of the first to speak against the bill. The president has surrounded himself with yes-men, which helps explain why he seems out of touch with many Colombians. Indeed, since the protests started he has given the impression that he hadn’t even read the bill. He seemed surprised to learn about some of its VAT measures and left Mr Carrasquilla and another minister to defend the reform.

Governing will become even harder for Mr Duque. His term ends in August 2022 and he is already seen as a lame duck. Opposition politicians feel emboldened. Gustavo Petro, a left-winger, is gaining momentum in the polls. He lost against Mr Duque in the presidential elections of 2018, but is planning to run again next year. He has proposed that the central bank print more money to deal with the aftermath of the pandemic, and has praised the late Hugo Chávez, the despotic socialist who set Venezuela on the path to ruin. Instead of a bold tax reform, Mr Duque’s legacy may instead be ensuring that Colombia gets its first socialist president.