Colombia extends its wealth tax

Colombia is one of the world’s most unequal societies. Last week, the government of Juan Manuel Santos, who began his second term as president in August, announced the extension of a wealth tax introduced in 2002 to pay for the mounting costs of the country’s 50 year drug-fuelled guerrilla war.

“In that sense, we are actually ahead of the curve of what Piketty proposes,” says Mr Cárdenas.

…“This touches only 50,000 Colombians out of the entire population” of 48m people, he says, “that is less than 1 per cent of the population.”

President Santos himself is a product of that 1 per cent. A US-educated economist and member of a wealthy family of the Colombian establishment, he heads up a centrist administration, not a Venezuela-style leftist regime.

Mr Santos has increased rates for various tranches of the levy, in some cases by 50 per cent. Those with a net worth of between $510,000 and $1.5m must pay a 0.4 per cent tax. The rate rises to 2.25 per cent for net worth above $4m. That applies to 45,000 businesses and about 1,000 individuals, Mr Cárdenas said.

Only about five percent of Columbians actually pay into the standard income tax system.  The FT piece by Andres Schipani is here.

Comments

Spell check got you - Columbia should be Colombia in the title.

Would be nice if the title spelled Colombia correctly.

Wealth taxes don't work because people will simply move their wealth. This means more money for the ridiculously overpriced condos in Miami.

The low tax payment compliance is common across all of Latin America, which leads to extremely cumbersome rules for regular businesses, as they end up being the defacto tax collectors for the government.

Taxes on all wealth don't work, because people will simply move their wealth. However taxes purely on real estate do work, because you can't move a piece of land. At most you'll push some people to leave your state/country entirely, but in practice that just doesn't happen: more people are moving to Texas, despite it having some of the highest property taxes in the country.

@ everybody who thinks tax evasion is easy: I've heard this argument before, that people will move their capital to cheaper sovereigns if taxes are raised, but in practice moving money is tough. I know since I had to move money during the Greek crisis, and it took about a year and threats of litigation and a lawyer (and I was doing in legally). For some in Greece, you could not legally move the money to Switzerland without either paying a huge 33% tax and/or facing criminal charges. So in practice, as is done in the Philippines and Greece (where the rich don't pay income taxes, literally, they pay zero): you simply have to break the law to avoid paying taxes. And in the USA with money laundering and tax dodging laws being very Draconian, that's harder than it looks. I doubt most of the people reading this have the balls or wherewithal to dodge taxes and/or move their money offshore. Like in my case (I have the wherewithal, since I do things by the book, but I'm a dual national and I have extensive contacts outside the USA). In short, you, American Average Joe, are going to have to pay more taxes in the future, like it or not.

I thought the US does not allow " Dual nationality."

Well, it is a matter of perspective. American citizens are welcome to hold as many citizenships as they desire (I have family who hold three passports, legally), but the American government claims exclusive rights over all its citizens. That is, it is utterly illegal for an American citizen to use a foreign passport to travel to Cuba. Or to even legally purchase Cuban products in one of the other countries they are citizens in.

As noted here - 'Transactions Involving Cuban-Origin Goods in Third Countries

The question is often asked whether United States citizens or permanent resident aliens of the United States may legally purchase Cuban origin goods, including tobacco and alcohol products, in a third country for personal use outside the United States. The answer is no. The Regulations prohibit persons subject to the jurisdiction of the United States from purchasing, transporting, importing, or otherwise dealing in or engaging in any transactions with respect to any merchandise outside the United States if such merchandise (1) is of Cuban origin; or (2) is or has been located in or transported from or through Cuba; or (3) is made or derived in whole or in part of any article
which is the growth, produce or manufacture of Cuba.' www.treasury.gov/resource-center/sanctions/Documents/ccigar2.pdf

Essentially, the U.S. completely ignores any claims to citizenship except its own in terms of dealing with its citizens. This extends, one must add, to anyone who the U.S. considers a legal resident in terms of acquiring citizenship, at least during their residency.

It's not that moving or hiding wealth from taxation is easy and/or legal, it's just that it becomes much more tempting upon the introduction of such measures because the payoff grows higher.

The more confiscatory the measures become, the more common the evasions, and the more normalized the whole notion of tax evasion. And eventually you find yourself in a culture where everybody who can does it all the time, and anyone who actually pays their taxes is perceived as a stupid, ridiculous chump and a laughing-stock instead of a virtuous man of integrity. It'd be a shame to transition from a high-trust social equilibrium to the universal-evasion culture that exists in many parts of the world.

+1, it doesn't need to be "easy", it just needs to be more worth it than not evading. Your last paragraph is basically Italy and Greece.

Presumably one would need economic growth to improve the lot of the less well off. Even to maintain what you have require investment. The moving of resources is about where those with capital invest. If taxation rates are too high, existing businesses will probably stay put but investment in new or even maintenance won't happen.

50,000 Colombians are now shopping for houses in South Florida.

Piketty - on the front lines against the Marxist menace.

Somehow, I doubt that this was the intended message.

Maybe the president should have attended the School of the Americas at Ft. Benning - they don't teach any version of economics there, compared to the University of Kansas.

Here is a link to that fine institution - http://en.wikipedia.org/wiki/School_of_the_Americas#Criticism_of_WHINSEC

And since I grew up in a Northern Virginia parish run by Maryknoll priests (we didn't need to read the media to know what was going on in several parts of the Central American dirty wars), I would be remiss in not adding this extra link in regards to the School of the Americas - 'School of the Americas Watch is an advocacy organization founded by former Maryknoll Father Roy Bourgeois and a small group of supporters in 1990 to protest the training of mainly Latin American military officers, by the United States Department of Defense, at the School of the Americas (SOA). Most notably, SOA Watch conducts a vigil each November at the site of the academy, located on the grounds of Fort Benning, a U.S. Army military base near Columbus, Georgia, in protest over human rights abuses committed by some graduates of the academy or under their leadership, including murders, rapes and torture and contraventions of the Geneva Conventions.[1] Military officials state that even if graduates commit war crimes after they return to their home country, the school itself should not be held accountable for their actions. Responding to "mounting protests"[2][3] spearheaded by SOA Watch, in 2000 the United States Congress renamed the School of the Americas the Western Hemisphere Institute for Security Cooperation (WHINSEC), rather than closing the academy. In addition, all students must undergo a minimum of eight hours of class on human rights and the principle of civilian control of the military.' http://en.wikipedia.org/wiki/School_of_the_Americas_Watch

Well we wouldnt want you to be remiss in your threadjack.

...and he has prior approval.

Hey, hey now - it was Prof. Tyler pointing out Piketty's role in defending a valuable American ally (around 1 million barrels a day worth of oil in 2013 - http://www.eia.gov/countries/country-data.cfm?fips=co ) from Marxist inspired revolutionary redistributionist elements.

You must not be a loyal reader - for a while, it seemed Piketty was responsible for pretty much all the ills afflicting the modern world according to this web site.

And in a turn which again confirms how inspired the satire found here truly is, we now find Piketty highlighted as inspiring elements of counter-revolutionary action against those willing to use violence to seize the means of (oil) production.

Dude, what the fuck are you talking about? God, if you are going to threadjack at least have the decency to own up to it rather then blather on nonsensically.

You did read the second sentence of the post, right? - ' Last week, the government of Juan Manuel Santos, who began his second term as president in August, announced the extension of a wealth tax introduced in 2002 to pay for the mounting costs of the country’s 50 year drug-fuelled guerrilla war.'

And the third sentence? - '“In that sense, we are actually ahead of the curve of what Piketty proposes,” says Mr Cárdenas.'

That's right, Piketty is on the front lines fighting against redistributionist Marxist subversives.

Well, to be accurate, the parish was run by Missionhurst missionary priests - the Maryknoll order members were visitors. (Talk about lapsing.)

I don't think Piketty was cited as the cause of any ill afflicting the modern world. A lot of people just think his theory is wrong.

In other news, Prior fails to protest every other school on earth whose pupils later did something wrong. That would be approximately all of them.

Well, you seemed to miss the point about me being a member of a Northern Virginia Catholic parish run by Maryknoll priests.

At that parish, it was not necessary to read any reporting about what was going on in several Central American dirty wars in terms of priests and nuns being killed.

I didn't know universities had the authority to tax.

They do if Mr.Bloomberg lives next door :-)

This isn't even close to being the most controversial topic of conversation in Colombia right now. This is: http://nailheadtom.blogspot.com/2014/09/uci-boss-brian-cookson-doesnt-like.html

Colombia, not Columbia

Please fix the headline. "'Columbia' is the gem of the Ocean." Colombia is a country that has costs on two of them.

Costs or coasts? Maybe Columbia has costs and Colombia has coasts.

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