Search
Close this search box.
63°F
Drizzle

Dia Sin Iva: Also known at Tax Free Shopping is Returning to Colombia

Share on:

Table of Contents

The Colombian Senate has approved a bill to bring back up to three “Days without VAT” each year, which would exempt certain essential consumer goods from the 19% value-added tax (VAT) on those designated days. The bill, which aims to stimulate consumption and support the Colombian economy, had previously been passed by the House of Representatives. It now goes to a conciliation phase before potentially being signed into law by the president.

The Day without VAT was first introduced in 2020 under former President Iván Duque as a measure to boost the economy amid the COVID-19 pandemic. On these tax holidays, Colombians could purchase certain products without paying the 19% VAT that normally applies. The last Days without VAT were held in 2022, though the final one in December was canceled by decree of the Ministry of Finance under current President Gustavo Petro’s administration. Petro has criticized the policy, arguing that it fails to distinguish between domestic and imported products and can thereby harm the Colombian economy.

Under the legislation passed by the Senate, the government would be able to declare up to three Days without VAT per year, with a minimum of three months between each occurrence. By January 10th each year, the executive branch would determine the dates and the list of tax-exempt goods, prioritizing products manufactured entirely in Colombia or with at least 50% domestic content. Consumers would be permitted to purchase up to three units of the same VAT-exempt item.

Proponents argue that the Day without VAT provides significant benefits to both consumers and businesses in Colombia. According to Senator Miguel Uribe Turbay, the bill’s sponsor, the tax holiday “relieves the pockets of Colombians, benefits the family economy and is essential for social well-being.” He notes that past Days without VAT enabled millions of Colombians to access goods they otherwise could not afford.

Beyond the consumer impact, supporters view the policy as a vital stimulus for Colombian businesses, especially in the commerce, industry, and labor-intensive sectors. Uribe Turbay describes it as “an opportunity to stimulate commerce, industry and labor-intensive sectors, especially at a time of economic contraction.” The bill also seeks to boost domestic manufacturing by prioritizing tax exemptions for Colombian-made products.

Historically, the Days without VAT have generated significant economic activity. Across the three occurrences in 2020, the events drove 13.9 billion pesos (nearly $3 million USD) in sales. In 2021, they generated over 30 billion pesos (around $6.5 million USD) in revenue. However, critics point to the substantial fiscal impact, with each Day without VAT estimated to cost the government around 148 billion pesos (over $30 million USD) in lost tax revenue, potentially reaching 500 billion pesos annually if three events are held.

Looking ahead, if the reconciled bill is signed into law by President Petro, the government would be required to evaluate the impacts of each Day without VAT held, assessing key economic indicators like household purchasing power, sales volumes, employment figures, and poverty levels, as well as the overall fiscal implications. This would provide data to guide decisions around the policy moving forward.

In summary, the passage of legislation to reinstate the Day without VAT reflects a concerted effort to leverage tax policy to stimulate the Colombian economy and support consumers still recovering from the pandemic’s financial shocks. While proponents emphasize the benefits to Colombian households and businesses, particularly in the manufacturing sector, critics including President Petro have questioned whether the gains are worth the sizable loss of government tax revenue. If enacted, rigorous evaluation of the policy’s impacts will be essential to determine whether this approach proves effective at achieving its intended economic goals.

Leave a Reply

Your email address will not be published. Required fields are marked *

Promotion by Kia Medellin

Similar Blogs

Bancolombia Experiences Widespread Outage, Leaving Customers & Businesses Stranded
Medellin Metro Now has Free WIFI
Pawsome Adventures: A Guide to Medellin's Dog-Friendly Attractions
Medellin Shopping Myth Unveiled: Pesos or Dollars?
El Centro Medellin Shopping Extended Hours
Rappi Turbo Down: When Will It Come Back Online?