Colombia’s Digital Entrepreneurs, Influencers Decry Proposed Tax Reforms

President Gustavo Petro’s proposed reforms will discourage content creation and stymie a multi-million-dollar industry, sector representatives say

The government of Colombian President Gustavo Petro seeks to rake in $25 billion in taxes in 2023.
September 06, 2022 | 12:33 PM

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Bogotá — Colombian ‘influencers’ and digital entrepreneurs are perturbed by proposals by congress member Milene Jarava’s bill aimed at complementing the tax reform presented by the government of President Gustavo Petro to Congress, and which aims to add an article to the reform that would establish tax on digital marketing sales and sweepstakes amounting to 50% of revenues.

Earlier this year, content creators and ‘influencers’ in Colombia launched an association, the Latin American Influencer Council (LAICK), a non-profit organization with the aim of representing content creators and positioning them as a pillar of growth and progress of the ‘orange’ or creative economy, both in Colombia and across the region.

LAICK also aims to underscore the importance of the sector to the economy, given its power to motivate decision-making and to drive connection with consumers as a key tool for brands and companies worldwide, and as a seedbed of entertainment, job creation and business development.

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LAICK posted a video on its Instagram page on Monday, in which LAICK founder Roberto Rave explains how the proposed tax would “severely” affect content creators and influencers and the creative industry in general, rejecting accusations that the sector does not pay taxes and pointing out that the sector is taxed at a higher rate in Colombia at around 54%, compared with other countries in South America such as Peru, Chile and Argentina, where the taxation is, according to LAICK, lower than 35%.

LAICK adds that, in the case of paying taxes on sweepstakes, the sector also already pays such a tax to the country’s gaming association, Coljuegos. LAICK points out that influencers are digital entrepreneurs, and with the proposed tax the government would be discouraging citizens from participating in the industry, which would be tantamount to stymying the progress of the digital economy and its job creation.

LAICK argues that digital entrepreneurs contribute 3% to the country’s GDP, and generates around 500,000 jobs, while claiming that the government is not acknowledging that such entrepreneurs already pay taxes.

View the video here, in Spanish:

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The tax proposals

The tax would apply to both sweepstakes in social networks and for advertising on social networks, but also including statuses, posts, publications or any other format used to gain followers or position brands.

Colombia’s tax and customs authority DIAN is closely following the income of influencers, and has claimed that although “some have filed their income tax returns”, others “have not included all of their assets or the total income obtained in the development of their activity”.

According to Sebastián Jasminoy, founder of digital marketing company Fluvip, the influencer marketing business currently moves more than $30 million a year in Colombia as a result of the activity of close to 1,000 content creators.

And globally, he says, the so-called mar-tech industry has been growing at a rate of 70% in recent years and is expected to generate around $20 billion by the end of 2023.

With a base of 2.5 million to 5 million followers, brands can spend between $150 million to $200 million on such influencer campaigns, according to Ana Ortiz, an influencer marketing expert and leader at The Ranga Media Company.

More taxes would be to put an end to thousands of enterprises and jobs”

Roberto Rave, director of LAICK

According to LAICK director Roberto Rave, “content creators have had good a response and proactivity in terms of understanding their social responsibility by complying with their tax obligations, such as filing their income and sales tax returns”.

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In addition, “the influencers that currently carry out sweepstakes must request permission from Coljuegos and pay 14% of the prize given as taxes, and 1% of administrative expenses. More taxes would be to put an end to thousands of enterprises and jobs”, he said.

LAICK highlighted “the importance of digital technologies to help small and medium-sized enterprises (SMEs) in developing economies to overcome obstacles and have greater growth and, therefore, play a significant role in the economic growth of these countries”.

LAICK cited Deloitte figures to state that, “in developing countries, 94% of SMEs manage some social network, e-commerce or run advertising campaigns on Google and the creative economy plays a transcendental role in these digital linkages”.

Earlier this year, Colombian influencer Yeferson Cossio, who has more than 9.7 million followers on Instagram, stated on social networks that he had paid “the ridiculous sum” of $572 million in his income tax return, allegedly without counting the other taxes he had to pay, and took the decision to renounce his Colombian citizenship.

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Meanwhile, Daneidy Barrera Rojas, known as Epa Colombia on social networks, criticized that she allegedly owed about $1 billion in taxes and said that in April this year she owed about $2.6 billion.

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“The more I sell, the more money they take from me,” she said at the time.

The tax reform has encountered opposition in the private sector and from other unions, such as that of traders who consider that it would affect their interests and could limit investment.

Petro’s government’s tax reform seeks to raise $25 billion in 2023, an ambitious goal considering that on average tax revenues have totaled $8 billion annually.