ATM Cards in Colombia - New Report Available

Undoubtedly, the 4 por mil has become a convenient tax for the government and a source of funds to cope with any conjuncture and it is proving difficult to relinquish. Created in 1998 as "2 por mil" (2 pesos for each Col$1,000?] transacted are retained as tax) to deal with the financial crisis and help banks to stabilise its finances, it was initially a temporary measure that has been extended and even increased to 3 por mil and now 4 por mil in the last years. In 2013, the government stated it will gradually dismantle 4 por mil until 2018 but it has again extended the process as it will be using the funds to support the agricultural sector after the strike that paralyzed the country in 2013. Once ferocious opponents of this retrograde tribute, have softened their position based on this laudable objective. The truth is those inconsistencies and contradictory messages of the government are sending a discouraging message to financial consumers as it has been, since it was created, responsible on the delays and lack of higher effectiveness of financial inclusion initiatives.

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Retroactive return of 2% VAT leads to recovery of card holders’ confidence

The return of 2% of VAT for purchases with debit and credit cards did not occur in 2013 due to the fact that the tax reform issued in that year included a new consumption tax mainly applicable to foodservice and not subject to that benefit. The card issuers systems were not prepared to differentiate when a purchase was subject to a VAT or new tax. A more varied range of VAT for different products and services also hindered the task. This is why the DIAN (Dirección de Impuestos y Aduanas Nacionales, or the tax and customs agency), announced the return, which importantly boosted card payments, would not be performed in 2013. This caused unease amongst consumers and card issuers as this regulation greatly bolstered the shift of stubborn cash users to financial cards. It also relieved in some way, the burden of the "4 x mil" tax (4 pesos for every Col$1,000?) in almost all of the financial transactions it is deducted from the transaction performer in the form of a tax. Finally, after a series of technical debates on how to perform this retroactive return, high courts and consumer defendant authorities ruled it was mandatory to return this acquired right to card holders. DIAN, in association with card issuers will made this retroactive return to card holders for the card payments made in 2013.

La Polar departure, a likely opportunity for other retailers

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