Fiscal Rule Committee Emphasize Urgent Need For Comprehensive Reform

*Ensuring Colombia's fiscal stability and keeping its investment-grade credit rating remain key. Both Fitch and Moody's this week announced the delay of the sovereign rating review in order to monitor the outcome of the upcoming tax bill.

• The committee statement explained that Colombia has the "inescapable need to safeguard the sustainability of public finances and macroeconomic stability"
• "Fiscal sustainability requires that the effect of these measures generate an increase in government's primary balance of at least 1.5 percentage points of GDP on a permanent basis"

The capacity for additional debt has "substantially" fallen and demands for higher spending must be accompanied by new tax revenue sources.

• According to a commission member, the proposed reform will recommend cuts to individual exemptions and a reduction of the items excluded from value-added tax.
• The committee's overarching recommendation will be that Colombia needs a non-partisan agency similar to the United States' Congressional Budget Office to centralise analysis of fiscal proposals, according to Dr. Kent Smetters, a professor at the University of Pennsylvania's Wharton School, speaking with Reuters.
• The VAT proposal is likely to be a point of particular contention in congress ahead of elections next year, but Smetters said the committee thinks expanding formalization will mean more people actually receive VAT reimbursements.