Colombia's Constitutional Court on Wednesday ruled that the economic emergency declared earlier this year by the government is unconstitutional and ordered the restitution of funds obtained under that state of exception.
The emergency had been invoked by the administration to mobilize 11 trillion pesos ($3.07 billion) to help cover part of this year’s budget. According to an official at the National Tax and Customs Directorate who spoke on condition of anonymity, 1.67 trillion pesos ($467 million) were collected as a result of the decree measures put in place during the emergency.
Under Colombia’s legal framework, an economic emergency is a form of state of exception that permits the executive to issue decrees and enact measures without prior congressional approval. The measures introduced during the contested emergency included a tax on liquid assets above 2.1 billion pesos, a special income levy directed at the financial sector, and a 19% charge on the sale of alcoholic beverages and gambling activities, as well as taxes applied to certain vehicles, motorcycles and aircraft.
Previous Constitutional Court decisions that struck down other economic emergencies had not applied retroactively - meaning the government was not required to return revenues previously collected. This ruling departs from that practice by ordering funds obtained under the now-invalid emergency to be returned.
The court’s decision is an additional hit to public finances at a moment when the administration is already confronting difficulties in Congress, where multiple fiscal reform proposals have failed to secure sufficient support. The deterioration in fiscal metrics had earlier prompted the government in June to suspend a fiscal ruling under which the Ministry of Finance had raised the fiscal deficit target for 2025 to 7.1% of GDP, up from an initial 5.1%.
In response to the budgetary shortfall, Finance Minister German Avila last week said he would bring a new tax reform bill to Congress aiming to raise 16 trillion pesos ($4.47 billion) to fund this year’s expenditures. That proposal will be introduced with less than three months remaining in the legislative session.
Exchange rate conversions cited in reporting use $1 = 3,578.82 pesos.
Notes: The court’s order and the sums cited reflect information released by the tax authority source and government announcements. The pace at which repayments will be made, and the legislative outcome of the proposed 16 trillion peso reform remain subject to the political process and legal implementation.