Colombia to issue digital currency to keep track of tax payments

The initiative will be accompanied by restrictions on cash payments and transactions worth over 10 million Colombian pesos ($2400)

17.08.2022 - 09:45

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What’s new? The Colombian government has announced its plans to launch a digital currency. One of the goals of the initiative is to curb tax evasion and improve the traceability of transactions made by citizens. The proposed measure will also be accompanied by restrictions on cash payments and transactions worth over 10 million Colombian pesos (~$2400). The head of the National Directorate of Taxes and Customs of Colombia Luis Carlos Reyes told the Semana newspaper.

Information on the Semana website

What else does Reyes say? He reported that the initiative was supported by the recently inaugurated President Gustavo Petro. According to Reyes, the proposal is aimed at combating tax evasion, which is estimated to be between 6% and 8% of Colombia’s GDP. He estimated that the proposed measure is equivalent to the 6 or 8 tax reforms the country has undertaken, with which 1% or 1,5% of GDP is collected.

However, Reyes did not disclose any characteristics of the digital currency or how it would work alongside traditional payment systems in the country.

What is the payment situation in Colombia? The use of cash for payments decreased during the COVID-19 pandemic, and now cash is one of the main payment methods in Colombia. Central Bank statistics show that the circulation of bills has increased to its highest level in 17 months.

According to data from the Financial Superintendency, Colombians still prefer cash for transportation (94%), groceries (80%), cell phone top-ups (78%), and rent (77%).

In February, the Colombian tax authority announced the adoption of special measures to tighten controls on taxpayers using cryptocurrencies to transact. The agency explained that the implementation of special measures is a part of Colombia’s policy to combat money laundering and terrorist financing.

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