A miracle, but not a model A dirty war against the paramilitaries?
Jan 122007

Here is the first of what I hope will be several posts from Chris Stubbert, a Canadian citizen and frequent correspondent living in Bogotá. 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 It was originally enacted as a temporary measure to finance the bailout of bankrupt financial institutions.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 Bogotá have been making record profits while acquiring banks across Latin America. Many people to whom I’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. Bogotá, the capital city, is suffering from an inadequate road network. Every year thousands more cars come onto the capital’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 aren’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 don’t exist in modern Colombia.

If dozens of villagers are massacred by the paramilitaries or guerrillas – as has been happening for decades here, the general reaction in the capital, Bogotá, is not protest but apathy. The millions of displaced people in the urban slums of Colombia’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 Jamundí had little impact on the public sphere. Sure, it made newspaper headlines… 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, “The 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.” Maybe people want to forget this dirty conflict – and that is the most dangerous thing of all.

C.H. Stubbert

Bogota, Colombia

January 9, 2007

7 Responses to “Taxation, Corruption, and Indifference”

  1. Santiago Says:

    Good article C.H. You hit the nail right on the head. So much of what the foreign press publishes about Colombia is inundated with bias and preconceptions.

    You tell it like it is. Right on about the desensitization of Colombians.

    My only comment would be about the education system. As far as I know, the coverage in Bogota is satisfactory. I’m not sure I would say it’s a ‘casualty’.

  2. Daniel Says:

    Some of your points are good ones, Chris. Cynicism and lack of trust are indeed part of the real story. I think it’s important you consider why this is so though and how, in large part, what you see today is a nothing but a logical consequence of at least twenty years of systematic political violence which has claimed many times more victims than any of us will ever know. The fact that the Colombian media have never reported anything but a minuscule part of this and that those responsible have never been punished for their crimes is Colombia’s tragic reality. More importantly, though, it is the ONLY point of reference many of the people you talk to have ever known. I think if you try and put yourself in the place of someone who has grown up with these kinds of realities -and I know that’s not easy- you may see that there has never been a blindfold over their eyes. Nor do they lack a sense of outrage vis a vis the injustices around them. Many are simply doing the best they can for themselves and their families to scrape by day to day in increasingly difficult circumstances. Unfortunately, I think this is unlikely to change until citizens of other countries take the blindfold off their eyes vis a vis what is going on in Colombia and what part we all have played in permitting it with our own indifference.

  3. richtiger Says:

    C.H. Stubbert writes, “Maybe people want to forget this dirty conflict – and that is the most dangerous thing of all.” Back in 1988 when I taught an English conversation course at the Colombo Americano in Medellin, I had the bright idea of having my students talk about the war in class. That particular class was a big failure as students were very reluctant to talk about the FARC, ELN, or narco-terrorism. Another teacher later told me, “I never bring up such topics. People just don’t want to think about such things.”

    Seems that, in this respect, Colombia has not changed much in the last almost 2 decades.

  4. AndreaSK Says:

    Great article Chris. Certainly an important perspective to keep in mind for those of us who only go to Colombia to visit; it’s easy to miss out on the details.

  5. jcg Says:

    I can also agree with some of the points mentioned by C.H., but not with every single detail.

    For example, there’s a lot of tax evasion in practice, most people don’t really pay direct taxes, and the top companies have access to tax benefits of questionable efficiency and reasoning. Not to mention that the tax code is bulky and pretty monstrous for the untrained eye, which further complicates things and continues to require an real structural reform. The theory doesn’t always match the reality.

    As for services, while the crisis affecting public hospitals is undeniable, not every sector is in the same condition. In Bogotá, for example, there are plenty of decent quality public services and overall coverage is usually around 80-90%, as far as electricity, water supply and education, among others, are concerned. Not perfect by any means, and there are probably several problems there too, but that still doesn’t look that bad to me. Even the poorer classes have been receiving increasing attention (as far as public services go) during recent local administrations. Still insufficient, perhaps, given the size and complexity of the overall problem, but sure as heck more than nothing or what little was being done years ago.

    Bogotá’s traffic problems don’t necessarily have to do only with the road network per se, IMHO, but also with the historical lack of attractive and efficient alternatives to private car use (Transmilenio is merely one part of the solution but it’s still far too limited as of yet…a metro is going to be inevitable at some point in the future), and the illegal operations of far too many taxis and buses (the latter of which, for example, have intentionally failed to meet their vehicle removal quotas). All factors count.

    As for corruption, it’s not only a problem of politicians per se, although they are definitely involved, but also of local bureaucracies and even private individuals. Each piece of the puzzle contributes to the greater whole, so to speak. There’s sort of a tradition of corruption, both small and large.

    Finally, about forgetting the conflict, remember that it doesn’t directly affect most people in the cities (it indirectly affects them in many ways, of course, but not all of them are obvious). A desensitized attitude isn’t simply apathy but also, at the very least partially, a psychological mechanism of self-defense. Many horrible things happen, but people still need to go to school, still need to work, and still need to have a private life. Something has got to give in, from time to time.

    Some of us can think and talk about the conflict regularly, partially because it concerns our own professions and interests, but many other people think they just can’t handle the daily horrors in the midst of all their other problems. It’s not only a matter of lack of outrage, but also a matter of psychology, so to speak.

  6. rainer cale Says:

    Thank you Chris for calling attention to these facets of the Colombian tax structure and for the striking comparison with Canada.

    As for solutions, I would agree with jcg that it cannot be reduced to a simple matter of “taking the blindfold off.” The reality one sees when the blindfold is removed is more often than not complex, ambiguous, and very case specific, not lending itself to a uniform and straightforward response. Chief among the complicating factors is the fact that no one wants to “almanacer muerto.”

    I have been living on and off in Colombia for about eight years now, and have also seen many positive transformations, in addition to the continued problems. It would be nice to see the alarmist tone of your post tempered by some acknoledgement of the positive anti-corruption developments. In particular I am thinking of the Attorney General’s recent actions with respect to the AUC-National Congress scandal.

  7. richtiger Says:

    Perhaps I should correct my own post in this series. I’m thinking of leaving my current job because of a conflict with a supervisor and consider that to be pretty much my “right.” Is it not understandable, then, that many Colombians wish to, and do, leave a country in which an armed conflict threatens their lives and happiness?

    Those who can’t physically get away from the threat of violence will naturally want to “get away” mentally: i.e. try to ignore the danger and live “normally.”

    Just wanted to soften the condemnatory tone of my comment above.

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