Week in Insights: Colombia’s Junk Food Tax Creates Opportunities

Curated by Daniel Xu

Colombia has implemented a “junk food law” whose tax system aims to curb consumption of processed food and sugary drinks.

The tax will target ultra-processed foods with an additional 10% surcharge, which will progressively increase to 20% in 2025. Introducing such a tax during a period of worldwide inflation is risky, but Colombia’s food inflation rates have decreased since the beginning of the year, with year-over-year increases dropping to 10.36% in October from 26.18% in January.

Colombia’s new tax policy encourages consumers to make better food choices—which, if effective, might save the country in health-care costs in the long run.

In addition to long-term savings, short-term policy shifts can alleviate the cost burden of higher-quality food on consumers. Revenue raised by the ultra-processed food tax can be used to subsidize healthy food options, either by directly reducing the retail price or providing vouchers or discounts to consumers. Such a system can be more effective if it targets low-income areas.

The government can also direct the revenue raised toward local farmers and markets, nutrition education programs, improved access to high-quality food in food deserts, and school nutrition programs. This approach of reallocating resources to other sectors of the food economy would create many opportunities.

At Bloomberg Tax, we’ll monitor Colombia’s bold experiment, and our experts will be ready to analyze what works, what doesn’t, and what is portable and ready to be tried elsewhere.

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—Andrew Leahey

Look for Leahey’s column on Bloomberg Tax, and follow him on Mastodon at @andrew@esq.social

A photo illustration of sugared sweets on Feb. 16, 2018, in London.

Photographer: Dan Kitwood/Getty Images

State Insights

Mark Richards of Ice Miller reviews the substantial roadblocks the state of Indiana would face in trying to get rid of its individual income tax, which makes up about $8 billion of annual revenue.

Texas’ prohibition of wealth tax legislation eliminates an option to address inequity in a state that already has one of the most regressive tax codes in the country, says Samantha Waxman of the Center on Budget and Policy Priorities.

As New York City tackles its byzantine property tax structure, a 2021 report fails to account for the system’s challenges, say Herman Katz’s David Wilkes and Warren Dubitsky.

Federal Insights

Exactera’s Mimi Song shares several ways firms can minimize risks against an uptick in transfer pricing scrutiny, such as embracing tax software and diligently documenting data and other important information.

A former Ernst & Young executive who is under consideration to be IRS chief counsel shows the challenges the federal government faces when looking for experienced people, says Northwestern University economist Silvia Vannutelli.

Legislation aimed at improving the IRS Whistleblower Program would reduce processing delays, end double taxation for attorney fees, and remove budget sequestration, says Kohn, Kohn & Colapinto’s Stephen Kohn.

Global Insights

Andrew Hocking of Sovos explains some of the value-added tax issues multinationals need to be aware of when managing their international supply chains.

Esquire Group’s Jimmy Sexton examines the US tax obligations of individuals who decide to expatriate following the State Department’s proposal to lower the expatriation fee to $450.

Columnist Corner

The Tax Cuts and Jobs Act of 2017 aimed to stimulate economic growth and combat global tax evasion, but has done little to reduce use of tax havens over the last six years. In this week’s Technically Speaking, Andrew Leahey says one potential solution is a refined global minimum tax, which “could provide a more robust and cohesive strategy to protect individual countries’ tax bases.”

Career Moves

Janet Truncale was named the next global CEO and chair of Ernst & Young.

James Morgan has joined Kirkland & Ellis as a partner.

Alex Barnes has joined Trowers & Hamlins as a partner with the tax practice in London.

David Holmberg has joined Bryan Cave Leighton Paisner as a partner with the global tax practice in New York.

Alix Langrognat has joined Hugh James as a partner with the private client team.

Daniel Lutz has joined Sikich as a partner with the tax practice.

If you’re changing jobs or being promoted, email your submission to TaxMoves@bloombergindustry.com for consideration.

News Roundup

It’s been another busy week in tax news from state capitals to Washington. Here are some stories you might have missed from our Bloomberg Tax news team (login required).

• The IRS bumped up income thresholds for tax brackets in its annual inflation adjustment—a smaller tweak than last year’s.
• Kuwait has become the latest country to sign on to the OECD-led global tax deal, the organization announced.
• The federal Internet Tax Freedom Act looms over state efforts to tax digital goods and services, leaving revenue agencies and business interests with little choice but to sort out their differences in court.
• The Treasury Department published new proposed rules on investment credits for green energy projects Friday, boosting clarity for investors considering financing such projects.

An aerial view of the Marina mall and boats moored in the Marina harbor in Kuwait City on April 13, 2023.

Photographer: Yasser Al-Zayyat/AFP via Getty Images

Tax Journals

Tax Management International Journal

The corporate alternative minimum tax of the Inflation Reduction Act of 2022 may affect more corporations and investors than originally expected, say Jennifer Lee, Zachary Kling, Jonathan Rhein, Zaira Cortes Rivero, and Peter Glicklich of Davies Ward Phillips & Vineberg.

US citizens residing in certain treaty jurisdictions should consider filing refund claims for foreign tax credits against net investment income tax liability to recover some of the paid NIIT, say Edward Tanenbaum and Heather Ripley of Alston & Bird.

Tax Management Memorandum

Disney’s Michael Salama explains how tax practitioners can best understand and mitigate the biases that may affect their judgment of uncertain tax positions.

(Bloomberg Tax login required)

Our Wish List

For December, we’re seeking looks ahead into 2024. What should tax professionals do now to prepare for next tax season, and what will they be talking about in the regulatory space? We’re looking for a thoughtful take that will get tax professionals talking about next year—even before the calendar flips over.

If you have an interesting, never-published article for publication, contact the Insights team at TaxInsights@bloombergindustry.com.

Our Team

We talk about tax a lot. But you would hear much more if you popped into one of our Teams meetings. Here’s a quick look at what some of us are watching, reading, and listening to this week.

Watching
Rebecca Baker (Editor-at-Large): The series run of “Taxi,” a sitcom that ran from 1978 to 1983 but still holds up today. It launched the careers of Tony Danza, Danny DeVito, and Marilu Henner.

Reading
Melanie Cohen (Content Editor): “The Race to Be Myself,” a memoir by track athlete Caster Semenya, who’s faced a lot of gender controversy and discrimination.

Listening
Andrew Leahey (Columnist): Holiday music is in full swing in our house—or at least in my headphones. I’ve been listening to “Ella Fitzgerald’s Christmas.”

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