Colombian lawmakers approve controversial tax reform

BOGOTA, Dec 19 (Reuters) - Colombia's Congress gave the

green light on Wednesday to a controversial bill that aims to

streamline the country's complicated tax system but at the cost

of reducing government tax receipts going forward.

Adjustments to President Juan Manuel Santos' tax proposal

were seen as a bitter pill for his administration, which had

wanted a reform that was revenue neutral for Latin America's

fourth-largest economy.

To get the tax reforms passed, Santos' government was forced

to call extra sessions of Congress and the president interrupted

regular television programming twice in the last month to

explain the reform to Colombians.

Finance Minister Mauricio Cardenas said that modifications

to the original government bill would cut annual tax collections

by about $280 million.

Despite the changes introduced by lawmakers, the government

welcomed the bill's passage.

"This reform will allow us to stop being one of the most

unequal countries on this continent ... it's a reform that will

allow Colombia to move formal employment generation forward,"

Cardenas said after the reform was approved.

"There'll be a reduction (of tax receipts), that is the cost

of the reform, but we believe that it's a cost that's worth

incurring because there are big benefits."

Much of the specifics of how the new law will turn out are

still up in the air since the Senate and House must now

reconcile their texts before it goes to Santos to sign into law.

Santos' government said the original bill's purpose was not

to change the amount of revenue the state takes in, but to

simplify taxes.

Critics said that the reform did not go far enough and that

large corporations should pay more taxes to help fund social

spending and reduce inequality in the Andean country.

"The more I think about it, the more sure I am that Santos

is imposing the worst tax reform in the history of Colombia.

None had dared to something as plutocratic," leftist Senator

Jorge Robledo said in a message on Twitter.

The bill is part of a range reforms pushed through Congress

since Santos came to power in 2010, including a fiscal rule to

make it a constitutional requirement for a balanced budget and a

change to the way oil and mining revenues are distributed.

Colombia is attracting record investment inflows, its

economy is expanding strongly and tax receipts are at historic

highs thanks to a U.S.-backed military offensive against leftist

guerrillas and drug gangs.

But it remains one of the countries in the region with the

greatest social and economic inequalities.

(Reporting by Carlos Vargas, Nelson Bocanegra and Jack Kimball;

Editing by Lisa Shumaker)

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