On October 29, the Supreme Court ruled against the surcharge on the financial sector that would force banks to pay 4% more income tax than other companies; that is, to pay 37% versus 33% for other firms. According to the Court, as the surcharge was sponsored by a national lawmaker, Sen. David Barguil (Partido Conservador – allied to the ruling party), it needed the Executive’s assent in order to be included in the Financing Law. Since the Ministry of Finance did not comment on this surcharge, the Court declared it unconstitutional, taking immediate effect.

Barguil’s surcharge stipulated that financial institutions should pay additional income tax over the next three taxable years. By 2019 it would be 4 points above the standard tax rate for companies, at 37 percent. By 2020 it would be 35 percent and by 2021 it would be 34 percent.

Sen. Barguil said, “I steadfastly refuse to let the state lower taxes on banks. It’s not fair! It ends up benefiting the financial sector (…) we are going to insist on this surcharge on bank income. I didn’t invent this formula, it has already been successfully applied in other countries such as Spain and England. Last year we put up a fight and we managed to pass the bill, and this year we are going to do it again”.

Regarding the declaration of unconstitutionality of most of the text of the Financing Law, the government has already reintroduced the Financing Bill to Congress. The text introduced by Minister of Finance Carrasquilla contains the article on the surcharge to banks. This means that the surcharge already has the backing of the Executive for the discussion of the new bill, which will prevent it from being declared unconstitutional again due to a lack of assent by the Executive. The Supreme Court had given validity to the Financing Law through to December 31, 2019, giving the Executive time to move forward with the new Financing Bill that complements with the one already passed in 2018 and was declared unconstitutional by the Court.