Why Colombia entered the list of tax hells

Recently, The 1841 Foundation published the new version of the Tax Hell Index ranking, a measurement that seeks to classify the countries with the most hostile tax environments in the world.

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Through it, the foundation analyzed which jurisdictions have the most restrictive or challenging tax environments in the world.

For this latest edition, 82 countries and jurisdictions in Europe and the Americas were evaluated, combining fiscal and governance indicators.

It should be noted that the index is constructed based on a quantitative assessment (60%), which includes tax pressure, public debt, inflation and deficit, and a qualitative assessment (40%), which measures the rule of law, accountability, political stability, government effectiveness and control of corruption.

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In this latest edition, Colombia has entered the list of the world's 12 Fiscal Hells. This time, Russia led the ranking, climbing from fifth to first place, driven by institutional deterioration resulting from the war against Ukraine, the rising fiscal deficit, and increasing restrictions on private property.

Venezuela, Argentina, Ukraine, Belarus, Ecuador, Bolivia, Brazil, Mexico, Moldova and Nicaragua are also included in this classification.

Countries such as El Salvador, Haiti, Suriname, and Honduras, which were in the most critical category in 2023, were displaced by economies such as Colombia, Ecuador, Moldova, and Mexico .

According to the report, Colombia's entry into this group was due to a combination of high tax burden, low institutional quality, instability, and poor protection of fundamental rights .

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In 2022, the Petro government implemented the latest tax reform, which is currently in effect.

“A tax hell isn't just a country with high taxes. It's, above all, a country where property rights, privacy, and the rule of law are disrespected,” said Martin Litwak, founder of The 1841 Foundation.

“The worrying thing is that, although some countries have seen slight improvements, the combination of aggressive fiscal policies and institutional deterioration persists in many parts of the world,” he concluded.

PORTFOLIO