VietJoy

BOGOTA - Colombia's constitutional court overturned on Wednesday a tax reform law that came into force this year, potentially affecting investment and forcing the government to unexpectedly find millions in resources in order to meet its fiscal goals.

The court ruled in a 6-3 vote that the law would remain valid only through the end of 2019, obliging right wing President Ivan Duque's government to seek to pass a new law. It said the law was not properly published in the legislative gazette between votes in the lower and upper houses, violating normal procedure.

The decision was the latest in a series of headaches for Duque, whose economic projects have faced strong opposition from lawmakers, complicating his efforts to reduce debt, boost growth and avoid a potential downgrade in credit ratings.

The law included increased income tax on high earners, a reduction in business duties and an additional tax on banks’ earnings. The elements of the old law that were overturned or modified will come back into effect if lawmakers do not pass an alternative proposal by Dec. 31, the court ruled.

The government has not supplied a calculation of the fiscal impact of the court's decision. It is targeting a deficit of 2.2% of gross domestic product next year, down from 2.4% this year.

Finance Minister Alberto Carrasquilla warned recently that a decision to overturn the law could affect investor confidence and bring lower growth for Colombia's $350 billion economy. "If it is not upheld, no one will believe again. The effect is permanent and in present circumstances is worth about a point and a half of GDP growth each year," Carrasquilla said.

The head of the tax agency said the government would propose a new law to keep benefits for businesses and raise the resources required for the budget if the reform was overturned.