By Carlos Vargas
BOGOTA, Oct 29 (Reuters) - Colombia's government on Thursday submitted to Congress a sweeping fiscal reform bill aimed at cutting public spending by about 15%, raising revenue through tax measures and averting a deeper deterioration in the country's public finances.
The proposed "Rescue Law" marks a high-stakes test for one of Latin America's largest economies, where rising debt and interest costs are squeezing the budget, threatening investment and complicating efforts to restore the investment-grade credit rating Colombia lost in 2021.
• Vice President Jose Manuel Restrepo said the bill was an economic "rescue operation" needed to defuse what he called a "time bomb" left for 2027
• He warned that one out of every three pesos collected in taxes is now used to pay interest on public debt
• Colombia's fiscal deficit would reach 9.4% of gross domestic product under current 2027 budget assumptions, a level the government described as unsustainable
• The government says around 70% of the proposed fiscal adjustment would come from spending restraint
• The rest would be borne by higher-income Colombians and other taxpayers through broader taxation and tougher enforcement
• The package includes a wider value-added tax base, higher or expanded levies on tobacco, vaping products, alcohol and sugary drinks, changes to personal income tax, a temporary surcharge on the financial sector, stronger anti-evasion measures and the sale of unproductive state assets
• The bill also promises lower tax rates for micro, small and medium-sized businesses and incentives for large investment projects
• The reform now heads to Congress, where it is likely to face a difficult debate
($1 = 3,165.5000 Colombian pesos)
(Reporting by Carlos Vargas; Editing by Nia Williams and Daina Beth Solomon)