Colombia Mulls Housing Tax Increase

The government has submitted a bill that, if approved, would increase the annual property tax in Colombia by 50% to 300%. The text, which has already caused a great uproar, was recently presented by the Minister of Finance, Ricardo Bonilla, and the Minister of Agriculture and Rural Development, Jhenifer Mójica.

However, Bonilla has emphasized that the bill, aimed at changing the limits of the property tax increase, represents “a relief for families.” The minister focuses his argument on the increasing updating of assessments, which is significantly raising the value of properties and, consequently, generating considerable increases in property taxes.

In this way, according to the government’s criteria, the maximum increase is set at 300%, and, according to the minister, it would only affect 5% of property owners.

Increases in property tax

The government’s bill regulates property tax increases based on cadastral assessment values. In this sense, the law provides for various types of increases for urban or rural properties, according to these valuations, which are in the current minimum wage (SM) in Colombia, a common economic calculation measure in the country.

Considering that the current SM in 2023 is 1,160,000 pesos, the tax increases established by the bill would be:

• Cadastral assessments equal to or less than 135 SM (maximum of 156.6 million pesos), the increase would be 50%.
• Cadastral assessments greater than 135 SM and less than 250 SM (156.7 million to 290 million pesos), the increase would be 100%.
• Cadastral assessments greater than 250 SM and less than 350 SM (290.1 million to 406 million pesos), the increase would be 150%.
• Cadastral assessments greater than 350 SM and less than 500 SM (406.1 million to 580 million pesos), the increase would be 200%.
• Cadastral assessments greater than 500 SM (580.1 million pesos), the increase would be 300%.

The text establishes a series of limitations. For example, it would not apply to properties that are incorporated into the cadastral base for the first time, urbanizable lots that are not urbanized, and those not built or rural properties with undeveloped and non-agricultural use subdivision licenses.

Government’s arguments

Through the Minister of Finance, Ricardo Bonilla, the government has defended its proposal, arguing that the bill has been designed “in accordance with the tax principles of equity, efficiency, progressiveness, and retroactivity” endorsed by the Constitution.

In this sense, Bonilla has stated that the current property tax does not reflect the reality of many properties, as many have depreciated or appreciated over time, deviating from the cadastral value that would reflect a past situation. This is why the minister argues that his proposal actually represents a cap on the significant increase in property tax that would result from an update of assessments on most properties. In many municipalities, assessments have not been reviewed in decades, so according to the minister, the update would be even greater than what his bill establishes.

“If the State updates the cadastral appraisal after more than five years, a significant impact on the taxpayers’ ability to pay is generated,” Bonilla said.

Critics of the proposal

Criticism has not been slow in coming. From political opposition to business organizations, many have strongly questioned the bill. The president of the National Federation of Merchants (Fenalco), Jaime Alberto Cabal, warned that if approved, the law would have a significant impact on household economies.

“From Fenalco, we express concern, great concern, about the bill that the national government, headed by the Minister of Finance and the Minister of Agriculture, has submitted to raise Colombians’ property tax by 50% to 350%, should this bill succeed,” Cabal said.

The impact, according to the president of Fenalco, would be even more severe on more vulnerable sectors, such as pensioners or lower-income individuals, affecting their right to decent housing, forcing some to sell their properties.

“The project affects the right to decent housing by excessively burdening the aspiration to own a home. In addition, segments such as pensioners, who live on subsistence incomes, and families living in their own properties that do not generate income would be forced to sell their properties because they could not pay the exponentially increased property tax,” says the president of Fenalco.

For her part, Senator of the conservative Democratic Center party, María Fernanda Cabal, has expressed her repulsion to the government’s proposal on her social media. “This is a crime against citizens. It is the bill of Ministers of Finance, Bonilla, and Agriculture, Jhenifer Mojica. We will oppose it because the property that has cost so much to many cannot be expropriated with unpayable taxes,” the senator tweeted.