High incomes and personal taxation in a developing economy: Colombia 1993-2010

We present series of the shares of income accruing to the top groups of the distribution in Colombia between 1993 and 2010, based on individual income tax data. We obtain four main empirical results. First, income in Colombia is highly concentrated,the top 1% of the income distribution accounting for over 20% of total income in 2010. This is at the highest level of inequality in any recent year in the entire WTID sample.Second, high-income individuals in Colombia are, in essence, rentiers and capital owners. Third, while households’ surveys show that inequality has been decreasing since 2006, tax-based results offer a different picture, where concentration at the top has remained stable; when survey based Gini coefficients are adjusted to take into account higher incomes reported to tax files, inequality levels are higher, and the recent reduction in inequality is less pronounced. Fourth, income taxation does little to reduce the high levels of inequality.