After nine months in office, the administration of President Gustavo Petro has embarked on a series of wide-ranging reforms to transform the regulatory framework for the economy and revamp the income tax system (both corporate and personal), social security system (pension and healthcare), and the Labor Code, not to mention reforms of the energy and mining sectors as well as the political system.
Proposed changes to the Labor Code include:
The proposed labor reforms are hugely ambitious in scope, with congressional support varying considerably across the reform packages. The tax reforms were approved in late 2022, raising corporate, hydrocarbon, personal income and wealth taxes, with the proceeds estimated to bring in new tax revenue equal to approximately 1.4% of GDP in 2023 and 2024 according to the Ministry of Finance. Other reforms, such as those for pensions and healthcare that would expand the role of government as service provider while reducing the role of the private sector in that capacity, are highly controversial and have run into significant opposition. For the same reasons, it may be difficult for the government to get the labor reform package approved without significant changes. Upcoming new elections to Congress in October 2023 leave a relatively brief legislative window of opportunity. Employers should monitor the progress of the various reforms closely.