Colombia, once a model of fiscal discipline for other Latin American nations, has seen its fiscal situation deteriorate since the early 1990s. Higher government spending, taxes that did not keep pace with expenditures, and severe recession led to an unsustainable debt-to-GDP ratio of 52 percent in 2002. Short-term tax increases, even coupled with spending reforms, have not restored Colombia to fiscal balance. A Colombian government commission charged with researching more long-term tax and fiscal reforms gave rise to the selected essays included in this book, each coauthored by Colombian and North American public finance experts. The analyses and recommendations have particular policy relevance for developing economies in general.
The studies include both broad discussions of Colombian fiscal and tax systems and detailed analyses of such specific tax instruments as the payroll tax, value-added tax, and the bank debit tax. The focus is on three key concerns: the sustainability of Colombia's fiscal situation, possible reforms to the national tax system, and the fiscal relationship between the national and subnational governments. The theme that emerges from these studies—the importance of moving toward a more efficient and equitable tax system while also raising revenue—suggests the limitations of stopgap measures and the real need for long-term fiscal reform.
About the Editors
Richard M. Bird is Professor Emeritus at Rotman School of Management, University of Toronto.
James M. Poterba is Mitsui Professor in the Department of Economics at MIT. He has been Director of the NBER Public Economics Research Program since 1991 and has edited volumes 6-20 of Tax Policy and the Economy.
Joel Slemrod is Paul W. McCracken Collegiate Professor of Business Economics and Public Policy and Director of the Office of Tax Policy Research at the University of Michigan.
"Colombia is a fascinating country for an economist. This book deals splendidly with its fiscal issues: students of both Colombia and fiscal policy for middle-income countries will learn a lot from it."
—Alberto Alesina, Nathaniel Ropes Professor of Political Economy and Chairman, Department of Economics, Harvard University
"An important addition to the voluminous literature on fiscal reform in Colombia. Its valuable insights into a variety of fiscal problems (not merely tax reform issues) should be useful to policymakers in many developing countries and countries in transition from socialism, as well as in Colombia."
—Charles E. McLure, Jr., Hoover Institution, Stanford University