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Tax and public expenditure trends Colombia: Lessons for the new administration of 2022-2026

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  • Sergio Clavijo

Abstract

This document examines the macro-economic performance of Colombia before pandemic (2015-2019) and then assess prospects over 2020-2024, with particular emphasis on fiscal stabilization. We first provide a long-term view and extract some of the fiscal characteristic of Colombia such as: i) directional persistence in tax and spending adjustments; and ii) searching for modular effect (building-blocks), given a complex "political-economy" that hair-cuts the proposed ambitious reforms. Then we turn to carry-out some public finance simulations regarding the required fiscal balance stemming from additional social expenditure and tax revenue efforts. By highlighting public expenditure rigidities, associated mainly with decentralization andmounting pressure for additional social expenditure, we also discuss prospects of the new Fiscal Rule (under Law 2155 of 2021) focusing on anchors related to debt-ratio targets and primary balance requirements. We conclude with some recommendations regarding a "political economy" strategy in order to pursue several structural reforms under the new Administration of 2022-2026, where computing a so-called "Social Betas" could help in setting priorities.

Suggested Citation

  • Sergio Clavijo, 2022. "Tax and public expenditure trends Colombia: Lessons for the new administration of 2022-2026," Documentos CEDE 20534, Universidad de los Andes, Facultad de Economía, CEDE.
    • Handle: RePEc:col:000089:020534
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    File URL: https://repositorio.uniandes.edu.co/bitstream/handle/1992/63101/dcede2022-44.pdf
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    References listed on IDEAS

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    1. Carmen M. Reinhart & Franziska L. Ohnsorge & Kenneth S. Rogoff & M. Ayhan Kose, 2022. "The Aftermath of Debt Surges," Annual Review of Economics, Annual Reviews, vol. 14(1), pages 637-663, August.
    2. Fernando Blanco & Pablo Saavedra & Friederike Koehler-Geib & Emilia Skrok, 2020. "Fiscal Rules and Economic Size in Latin America and the Caribbean," World Bank Publications - Books, The World Bank Group, number 34417, December.
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    More about this item

    Keywords

    Taxes; Public Goods; Public Debt; Latin America.;
    All these keywords.

    JEL classification:

    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • H44 - Public Economics - - Publicly Provided Goods - - - Publicly Provided Goods: Mixed Markets
    • H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt
    • O54 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Latin America; Caribbean

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