The administration of President Abelardo De La Espriella formally submitted the Economic Rescue Law to the Congress of the Republic on October 29, 2026, setting the stage for a sweeping overhaul of national finances. El Tiempo reported that the legislative package combines aggressive tax adjustments with a sharp contraction of bureaucratic spending to confront mounting fiscal pressures.
José Manuel Restrepo delivered a stark warning regarding the country’s economic trajectory during the introduction of the bill. The previous government left us a time bomb. We present this law to save Colombia from bankruptcy, avoid the loss of 360,000 jobs, and prevent a recession,
Restrepo stated. According to data presented to lawmakers, public debt swelled from 800 trillion pesos to over 1.2 trillion pesos in just four years, an increase approaching 50 percent that currently forces the state to allocate one-third of its entire budget exclusively toward interest payments.
Restructuring the Tax Burden and Overhauling the Value-Added Tax
At the center of the fiscal proposal is a fundamental realignment of the value-added tax. While the general rate remains anchored at 19 percent, the legislation eliminates the preferential 5 percent tier starting in January 2028. Everyday staples that previously enjoyed reduced taxation—including processed foods, canned goods, condiments, and certain agricultural inputs—will transition to the standard 19 percent levy. Portafolio.co noted that the national carbon tax will also scale upward gradually, moving from 0.87 UVT per ton of CO₂ equivalent in 2027 to 1.59 UVT by 2029.
To shield vulnerable populations from these consumption adjustments, the administration introduces a digital compensation mechanism named EfectIVA. El programa devolverá el 100 por ciento del valor del IVA a 19 millones de colombianos de menores ingresos de acuerdo con los mecanismos de focalización del gasto social. Households earning up to 3.4 million pesos will receive a monthly compensation averaging 213,000 pesos, with a maximum cap of 288,000 pesos. Valora Analitik noted that while the permanent scheme launches in January 2028 alongside a DiAN electronic invoicing rollout, beneficiaries will receive an advance disbursement no later than December 20, 2027.
The corporate tax structure undergoes a parallel reduction. The general corporate income tax rate will drop to 33 percent in 2027 and settle at 31 percent in 2028. Furthermore, the newly introduced Ruge regime establishes a preferential 20 percent income tax rate for companies executing large investments between 2027 and 2028, shifting to 26 percent for investments made in 2029. In a move designed to protect domestic commerce from foreign online competition, the bill mandates that all e-commerce purchases from international platforms under 200 US dollars will now be subject to the standard value-added tax.
Supressing Bureaucracy and Redrawing the Executive Branch
Beyond fiscal adjustments, the legislative package grants broad executive authority to shrink the administrative footprint of the state. El Colombiano reported that Article 7 of the bill awards President Abelardo De La Espriella extraordinary powers for six months to suppress, merge, or restructure national executive entities. Government plans contemplate eliminating or combining 105 of the 209 existing entities, targeting a 15 percent overall reduction in the size of the state.
Operating expenditures face stringent limitations. Spending on service contracts must drop by 50 percent by 2027, after which point such contracts will only adjust in line with inflation. Salaries across the General National Budget—excluding the Armed Forces—must absorb a 20 percent reduction by 2028. Special public funds and fiduciary accounts must transfer their liquid surpluses directly to the National Treasury annually, though resources dedicated to healthcare, basic education, potable water, and pensions remain legally protected.
