The announcement of a package of new taxes in Colombia, amid the declaration of an economic emergency by the national government, has ignited fiscal and political debate in the country. In late December 2025, President Gustavo Petro signed a decree empowering the Executive to establish additional taxes on the grounds of addressing a public finance crisis that could jeopardize the 2026 budget.
The measure comes after Congress struck down the tax reform bill, leaving a funding gap that the government seeks to fill with additional revenue estimated at 11.1 trillion pesos (approximately US$2.92 billion). While the Executive argues the need to maintain fiscal balance and ensure the fulfillment of essential obligations, the constitutionality of the economic emergency is still pending review by the Constitutional Court, opening a legal showdown over the legality and scope of these decisions.
The decree, published in late December, takes effect just as the country faces mounting fiscal pressures and a projected deficit that exceeds the limits allowed by the fiscal rule. The government maintains that the crisis is not solely the result of the failure of the tax reform, but also of unforeseen economic events and judicial obligations, such as compliance with rulings related to the health care system, which have required unexpected expenditures in the original budget.
Even so, the use of the “economic emergency” mechanism to impose taxes has drawn criticism from political and economic sectors, which argue that this constitutional tool is reserved for extraordinary situations such as natural disasters or severe crises, not to make up for the legislature’s failure to approve a fiscal reform.
New taxes introduced under Colombia’s declared ‘economic emergency’
The central focus of the fiscal package announced by Finance Minister German Avila is the expansion of the tax base and the creation of levies that mainly affect sectors with higher incomes and greater ability to pay, according to the government.
One of the most notable measures is the modification of the wealth tax, which traditionally applied only to those with assets above a very high threshold. Under the new decree, the threshold for paying this tax is significantly lowered, meaning that more taxpayers with wealth starting at 2 billion pesos (approximately US$530,000) will be required to pay, with progressive rates rising to as much as 5% for the highest levels of wealth. This change is projected to be one of the most important sources of revenue within the economic package and will affect approximately 102,000 taxpayers.
The financial sector also plays a prominent role in the changes. There is currently a 5% surcharge on the corporate income tax for financial institutions, which, under the decrees, would be raised to as much as 15%, potentially bringing the effective tax rate for these companies to around 50%, albeit with nuances due to existing tax benefits.
The government estimates that this surcharge will generate more than 1 trillion pesos (approximately US$265 million) for state coffers in 2026. To counter perceptions of unfairness or excessive burden, Avila has stated that the changes are designed under the criteria of progressivity and will not affect basic basket goods or impact the middle or lower classes.
Indirect taxes are also included in the decree. The Value-Added Tax (VAT), which currently applies to certain categories at reduced rates, will undergo significant adjustments. Products such as alcoholic beverages and online gambling will move to a general rate of 19%, equivalent to the standard VAT rate, while other goods considered luxury items will see an increase in the consumption tax.
According to official arguments, these measures aim not only to boost revenue but also to discourage the consumption of products that, in excess, can have negative effects on public health.
El Ministro de @MinHacienda, Germán Ávila, anunció que una de las primeras medidas de la Emergencia Económica será modificar el impuesto al patrimonio para hacerlo más progresivo.
La nueva tarifa comenzará desde patrimonios de $2.000 millones y aumentará gradualmente hasta un 5%… pic.twitter.com/8zgxbXv7or
— Presidencia Colombia 🇨🇴 (@infopresidencia) December 30, 2025
Political and legal repercussions
The government’s decision to use the “economic emergency” as a tool to impose taxes has generated intense political debate. For its critics, the measure amounts to bypassing the legislative branch, usurping Congress’s functions in fiscal policy matters, which constitutionally fall under the purview of the legislature.
Opposition sectors have argued that this interpretation of the economic emergency lacks a solid basis, as no exceptional event clearly defined as a natural disaster or a health crisis of extraordinary magnitude has occurred. As a result, it is expected that the Constitutional Court, once it resumes its duties after the judicial recess period, will carefully assess the legitimacy of these measures and their compliance with the Constitution.
Beyond the legal criticism, the measure has also been the subject of discussion among economists and business associations. Some sectors have expressed concern about the impact these taxes could have on investment, economic activity, and job creation, especially if such tax burdens are felt beyond the target segment defined by the government.
Others, by contrast, defend the need for extraordinary mechanisms to address a fiscal imbalance that, if left uncorrected, could lead to a spiral of indebtedness and a deterioration of market confidence in the Colombian economy.
In practice, the implementation of these taxes by decree and their possible suspension or modification by the Constitutional Court will shape the course of fiscal policy in Colombia in 2026.
With a public deficit that has required urgent measures and a Congress that has rejected major reforms, in an imminent electoral context, the Government is betting on an extraordinary and temporary solution, although the controversy over its legitimacy persists and is expected to continue in the coming months.