Tax reform: The government defended the non-deductibility of royalties

The High Court held a public hearing with the aim of listening to key actors in the study of two lawsuits against an article by the tax reform of the national government who made some changes to royalties.

The adjustment that was included in the tax reform indicates that companies cannot deduct royalties from income taxes, nor can they be treated as a cost or expense to a company.

This is one of the changes that has generated the most controversy among the Law 2277 of 2022 of this reform adopted last year.

The Minister of Finance, Richard Bonillawho was present at the hearing defended the regulations endorsed in the tax reform regarding this controversial point.

“If the deductibility were allowed, we would give the individual a property that does not belong to him, we would give a portion of the state’s property, for which we would limit the organization of the general budget of the nation,” Bonilla said in his speech.

The head of the treasury portfolio reminded that this income tax is one of the most important revenues that the Stands.

The outgoing Minister of Mines and Energy, in turn, Irene Velezstressed that the tax reform creates a state of fairness not seen before.

“Since the royalties respond directly to compensation for the social and environmental externalities generated in the extractive areas, and on the other hand, it is recognized as that compensation with respect to resources owned by the nation. In this sense, this position allows us to ensure that we contribute to productive diversification, social investment and compensation for the social and environmental damage generated in the exploitation of non-renewable natural resources with respect to the general system of royalties,” said Vélez.

The reason for the demands

The plaintiffs argued that the taxable base of the companies dedicated to the hydrocarbon sector has increased so that they now have to carry out double taxation equivalent to royalties and income tax.

Francisco Lloredachairman of the Colombian Petroleum Association (ACS)stated that preventing the deductibility of the income tax base, as intended, would impose an excessive and disproportionate tax burden on businesses.

“There is no justification for any other sector of the economy to deduct all payments to the state, and it violates the principles of justice and fairness because in the case of an economic consideration in favor of the state and which is not part of the income of the producers until the time of the audit, it forces them to pay taxes on these royalties unfairly and unfairly,” said Lloreda.

There will be another hearing

To continue the debates on this tax reform in the Constitutional Court, there will be a second day of it public audience scheduled for August 4, for which members of the national government along with the Autonomous Committee of Fiscal Rule (CARF) and the Colombian Institute of Tax Law.

Source: El heraldo