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The Distributive Impact of Taxes and Expenditures in Colombia

Author

Listed:
  • Jairo,Nunez
  • Olivieri,Sergio Daniel
  • Parra,Julieth
  • Pico,Julieth

Abstract

Colombia has reduced extreme poverty in the past 16 years by almost half, moderate poverty by 22 percentage points, and made more than four million Colombians jump the threshold of multidimensional poverty. However, it remains one of the most unequal countries in the region, after Brazil and Panama. Fiscal policy is one of the instruments that allow governments to speed up the decline in inequality levels and reduce poverty. This study presents an exhaustive and comprehensive analysis of the distributional impacts of taxes and expenditures in Colombia in 2017. It makes a methodological comparison with the Commitment to Equity, which was previously implemented, and includes multiple improvements in the methodology. The results suggest that the combined effect of taxes and social spending in Colombia contributes to poverty reduction between 0.3 and 2.6 percentage points for US$5.5 and US$3.2 per day per person respectively, while inequality is reduced by almost one Gini point. Taxes and direct transfers, as well as indirect transfers, are progressive and pro-poor, while indirect taxes are regressive and contribute to an increase in inequality. Finally, transfers in-kind for education and health services are progressive and contribute to the reduction of inequality.

Suggested Citation

  • Jairo,Nunez & Olivieri,Sergio Daniel & Parra,Julieth & Pico,Julieth, 2020. "The Distributive Impact of Taxes and Expenditures in Colombia," Policy Research Working Paper Series 9171, The World Bank.
    • Handle: RePEc:wbk:wbrwps:9171
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    References listed on IDEAS

    as
    1. Inchauste Comboni,Maria Gabriela & Militaru,Eva, 2018. "The distributional impact of taxes and social spending in Romania," Policy Research Working Paper Series 8565, The World Bank.
    2. Nora Lustig, 2017. "The Impact of Taxes and Social Spending on Income Distribution and Poverty in Latin America. An Application of the Commitment to Equity (CEQ) Methodology," Working Papers 1714, Tulane University, Department of Economics.
    3. Moller, Lars Christian, 2012. "Fiscal policy in Colombia : tapping its potential for a more equitable society," Policy Research Working Paper Series 6092, The World Bank.
    4. Lars Christian Moller, 2012. "Fiscal Policy in Colombia," World Bank Publications - Reports 26883, The World Bank Group.
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    Cited by:

    1. Luis Armando Galvis-Aponte & Jaime Bonet-Morón & Leonardo Bonilla-Mejía & Andrea Otero-Cortés & Gerson Javier Pérez-Valbuena & Christian Posso & Diana Ricciulli-Marín, 2021. "Desigualdades del ingreso en Colombia: ¿cuáles son sus determinantes y cómo se han afectado por la pandemia del Covid-19?," Revista ESPE - Ensayos Sobre Política Económica, Banco de la República, issue 101, pages 1-53, December.

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