Colombia's Santos says tax reform must and will pass this year

[May 11, 2016]  By William Schomberg and Michael Holden

LONDON (Reuters) - Colombian President Juan Manuel Santos said a tax reform bill, considered vital to help the country cope with plunging oil revenues, will be approved by Colombia's congress before the end of 2016 and would not be delayed by the country's peace process.

Speaking to investors in London, Santos said he hoped the government would soon conclude lengthy talks with leftist FARC rebels to end Latin America's longest war but said this would not detract from fiscal reform.

"This will be approved, this has to be approved before the end of the year for the reform to start producing its effects next year," Santos said referring to the tax reforms. "There will be no problem."

Investors are keen for signs of progress on the reform without which the country could see a downgrade to its credit ratings. Standard & Poor's said in February it could cut Colombia's rating if there is no progress on the plan this year.

Santos said he had support for the tax overhaul plan from parties accounting for about 80 percent of Congress and he denied he was prioritizing the peace process, which the government had hoped to conclude in March.

"So some people are saying the president is playing politics, he wants the peace and he will sacrifice the fiscal reform. Nonsense, I'm not going to sacrifice the fiscal reform. We need it and we will have it approved."

PEACE IN "VERY NEAR FUTURE"

Santos said he hope the negotiations to end the war with FARC, the Revolutionary Armed Forces of Colombia, which has killed about 220,000 people since 1964, would be concluded "in the very near future" but gave no specific timetable.

"As soon as possible," he said when asked for a date. "We're very close to ending the war."

U.S. Secretary of State John Kerry, who met Santos shortly after the meeting with investors in London, said Washington hoped to see a deal imminently.

"Mr President, we really encourage these next days ... that hopefully can see this important agreement reached," he told Santos in front of reporters.

Asked whether the tax reform bill would include changes to value-added tax, Santos said he would not announce details of the changes before presenting them to the country's congress.

Santos also said he would stick to the country's fiscal rules, which set limits for the budget deficit, and they would not be derailed by the costs of reintegrating combatants from the country's civil war into society and compensating victims.

"No matter what happens we will respect this fiscal rule," he said.

Andres Escobar, deputy Colombian finance minister, said the tax reforms aimed to increase tax revenues by 1.5 percentage points as a share of total economic output.

Juan Pablo Cordoba, head of the Colombian Securities Exchange, said the reform needed to ease the burden on the country's big businesses as 3,000 firms, of a total of around 1 million, currently pay 70 percent of all Colombian income tax.

(Additional reporting by David Brunnstrom; Editing by Andrew Heavens)

[© 2016 Thomson Reuters. All rights reserved.]

Copyright 2016 Reuters. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.