Here is the first of what I hope will be several posts from Chris Stubbert, a Canadian citizen and frequent correspondent living in BogotÃ¡. Here, Chris notes that Colombia’s government manages to collect lots of taxes – at least from the middle class – and wonders why people are not more outraged that they seem to get so little back.
Taxation, Corruption, and Indifference
The modern history of taxation in my country began during the First World War. During the war, the government introduced a temporary income tax to raise much-needed funds to fight the enemy in Europe. Yet after the war, the government could not give up this endless supply of finance. Canada today is one of the most taxed nations on Earth, but arguably holds some of the finest public schools, affordable universities, free universal health care of high quality, and an admirable national pension system.
This background weighs heavily when I think about the tax burden here in Colombia. Businesses in Colombia are taxed at about 38.5% of their profits, while middle-class citizens are taxed just under this amount. A 16% sales tax (IVA) raises further cash for the government.
And finally, the most bizarre taxes of them all: the financial transaction tax. All withdrawals from savings and checking accounts, credit card transactions, loan disbursements, and certain other transactions are charged 0.4%. It was originally imposed in 1998 as a temporary tax of 0.2%, but was made permanent in 2001, and today is 0.4%. The tax is an important source of revenue to the government, contributing revenues equal to about 0.8% of the GDP. It was originally enacted as a temporary measure to finance the bailout of bankrupt financial institutions. Yet today banks like Davivienda, Bancolombia, BBVA, and Banco de BogotÃ¡ have been making record profits while acquiring banks across Latin America. Many people to whom Iâ€™ve talked in Colombia claim that the real purpose of this tax is to finance the war and feed waste and corruption in the government.
One would expect all of these taxes to amount to some pretty decent public services – but the reality is very different. BogotÃ¡, the capital city, is suffering from an inadequate road network. Every year thousands more cars come onto the capitalâ€™s streets, and the traffic gets worse. I have seen this change after living here for only 18 months.
Education is another casualty. Most of the middle and upper class here go to excellent private schools, while the majority working and poorer classes are left with low-quality and overcrowded public schools. There arenâ€™t even enough schools to accommodate the demand, leaving many without a secondary education.
Healthcare, too, is in crisis. The private clinics patronized by the upper and middle classes are as high-quality as those of any developed nation, while the government-funded public hospitals are underfunded and overwhelmed.
I continually ask Colombians from all backgrounds the same question: if there is so much taxation in this country, why are government services so poor? The answer I commonly hear is that the politicians are simply funneling the tax money into their own interests or their own pockets.
That corruption is a chronic problem in this country is not news, but this perception of corruption is of greater concern to Colombia as a whole. Cynicism and lack of trust in the security services, legal system, and political environment are the real story here. Yet a sense of serious outrage and a desire for immediate change donâ€™t exist in modern Colombia.
If dozens of villagers are massacred by the paramilitaries or guerrillas â€“ as has been happening for decades here, the general reaction in the capital, BogotÃ¡, is not protest but apathy. The millions of displaced people in the urban slums of Colombiaâ€™s biggest cities are virtually invisible. Even the May 2006 massacre of a police anti-drug unit at the hands of an army patrol in JamundÃ had little impact on the public sphere. Sure, it made newspaper headlinesâ€¦ but after a few days, people focused on something else.
Why the desensitized reaction to corruption, violence, and political incompetence? The lack of outrage, the lack of a culture of change, allows issues like lost and wasted tax revenue to persist. But Colombian citizens themselves must also take the blindfold over their eyes and demand justice and transparency.
Someone told me recently, â€œThe urban middle class think everything has gotten better here. The economy has improved, security is better from city to city, but people forget there is a still a war going on in the countryside.â€ Maybe people want to forget this dirty conflict â€“ and that is the most dangerous thing of all.
January 9, 2007