The tax reform redesign promoted by the government after recent cuts to the 2026 budget will shift the weight of collection to consumption tax, with hopes that the new law will get the green light by the end of the year.
The proposal, which the Ministry of Finance has begun presenting to members of the Economic Affairs Committee, Most of the expected revenue is concentrated in taxes on alcohol, tobacco, and other products that are associated with “negative externalities.”.
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The stalemate that has characterized weeks of parliamentary debate on tax reform has moved a step closer to a possible resumption of debate. Administration aims to secure P16.3 billion to cover 2026 budget.
Of that total, 4.1 trillion pesos can be covered by the new consumption tax alonewhich includes both tobacco and alcohol.
The original proposal envisaged a minimum tax of P11,200 per pack of cigarettes, on top of which additional taxes would be added. For alcoholic beverages, The proposed amount would be a basic tax of 19% plus a special fee depending on the alcohol content of the product..
The project also includes a chapter aimed at increasing VAT collections with a target of P2.9 billion. This section includes games of chance and chance, as well as VAT on hybrid vehicles.thus expanding the range of products and services subject to this tax.
Regarding wealth tax, the government maintains its goal of collecting P2.2 billion. However, a related fix has been introduced. The applicable threshold for this tax will be lowered from P3.585 billion to P1.991 billion, expanding the range of affected taxpayers.
On the other hand, the proposed amendment aims to reduce the tax burden on individuals. Initially, the sector’s income tax liability was expected to be P917 billion, but the new estimate has been reduced to P215 billion.reflects a more moderate position in this regard.
In line with previous announcements, the government will exclude increased VAT on diesel and petrol from the initiative. However, questions remain as to whether the final document will include other taxes related to these fuels. Among the measures being considered is an increase in carbon taxes, which could affect the prices of both diesel and gasoline.
For the tax reform to take effect, it must pass through the four economic committees of Congress and be approved by the plenary sessions of both houses of Congress.
The debate in the Parliament of the Republic intensified after it became clear that: New tax reforms promoted by the Gustavo Petro government are considering applying a 35% income tax to church activities not directly related to evangelization..
The proposal sparked an immediate reaction among lawmakers, who voiced their opposition to the measure.
The project provides for taxes to be applied in stages, rather than in full immediately. It will start at a rate of 26% in 2026 and increase gradually until it reaches 35%.. The hierarchical structure attempts to give religious groups time to adapt, but it has failed to eliminate criticism within parliament.
The controversy continues to be about evangelical activities that will be exempted. Items deemed unrelated to religious activities will be subject to new taxes.
The details of this distinction and its impact on church operations are the subject of debate among members of the Economic Affairs Committee, who have already expressed their disapproval of the idea.
With the announcement of this particular point of tax reform, debate has centered on the relationship between the state and religious groups, and the extent of the tax exemptions that have historically been granted to these groups.
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