Colombian lawmakers vote against government’s $2.24 billion tax reform

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BOGOTA (Reuters) -Colombian lawmakers on Wednesday rejected a tax reform which the government of President Gustavo Petro said was necessary to finance its budget in 2025, following recent cuts to this year’s spending plans amid lower-than-expected tax take.

Economic committees in the Andean country’s Congress voted against the proposed reform, which Finance Minister Diego Guevara this week said would raise some additional 9.8 trillion pesos ($2.24 billion).

The result is a bitter blow for Petro, whose government has already cut spending this year by 28.4 trillion pesos due to lower-than-expected tax income. The government had earlier tried to sway lawmakers by cutting the proposed tax reform from the 12 trillion pesos it had initially floated.

It also follows Congress’ rejection of the government’s 523 trillion peso budget for next year, arguing that the resources needed to finance such spending are not available.

Though Petro said he would pass the budget by decree, he has held off on doing so while the government attempts to push the tax reform through.

During the first six month’s of Petro’s administration, the government managed to consolidate a majority coalition in Congress that helped pass a first tax reform. However, the disintegration of Petro’s majority has made passing subsequent laws more challenging.

The Autonomous Fiscal Rule Committee last month said the 2024 budget needed a 56.2 trillion peso cut to comply with the so-called fiscal rule, which was created in 2011 to implement policy constraints that prevent the deterioration of public finances.

($1 = 4,377.34 Colombian pesos)

(Reporting by Carlos Vargas and Nelson BocanegraWriting by Oliver GriffinEditing by Lincoln Feast.)