coverage that allows obtaining results in 4 of the 5 regions, in which the national territory is divided: Atlantic, Eastern, Central, Pacific and finally the capital cities of departments of the Amazon and Orinoco. Additionally, the survey is representative of the 32 capital cities of the country's departments and the following 6 prioritized municipalities: Rionegro, Soledad, San Andres de Tumaco, Barrancabermeja, Buenaventura, and Yumbo.

## **_Administrative Data_**

Additional information was required to complement the household survey information. Some of the sources used in the development of the model are the following<sup>28</sup> : (i) DIAN administrative data: Amount in returns for each of the income types and exempt income; (ii) Utilities Information System; (iii) Energy and gas rate bulletins; (iv) Investment Project monitoring system; (v) School Meals Program Report for January-December 2017; (vi) The information available in the Pension Fund; (vii) Local Fiscal Account; (viii) Information from the General System of Transfers; (ix) Resolution 6411 of 2016; (x) The tax statute in force in 2017 which is Law 1819 of December 29, 2016; (xi) The 2010 input-output matrix on 2005 basis<sup>29</sup> ; (xii) The matching between the products of the ENPH, the CPC 2.0 and the national accounts; and (xiii) The reference prices of alcoholic beverages and tobacco products for the year 2017.

# ii. Methodology

For the incidence analysis of each one of the fiscal interventions, and the impact on poverty and inequality of each one of the taxes and the social spending of the government, the Commitment to Equity methodology proposed by Lustig (2018) was followed. This method calculates per-capita income before and after each of the tax interventions, as shown in Figure III-1. More precisely, the following income definitions are used for each household:

- _Market income:_ This income includes salaries before tax and before contributions to the social security system, as well as income received from yields on capital assets (interest, dividends, leases) and transfers from private institutions or other households.

- _Disposable income:_ direct transfers are added to market income to build this income, which in the case of Colombia stems from transfers received from government programs such as Familias en Acción, from which direct taxes, that is, income tax is subtracted. Similarly, contributions made to the social security system are subtracted.

- _Consumable income:_ Consumable income is defined as disposable income plus indirect subsidies, minus indirect taxes. Indirect taxes included in this analysis are VAT, consumption tax, and excise taxes applied to tobacco and alcoholic beverages, as well as contributions in the payment of utilities for strata 5 and 6. Indirect subsidies correspond to those received by strata 1, 2, and 3 in the utility rates. The fuel subsidy has not been included in the analysis.<sup>30</sup>

- _Final income:_ Lastly, the in-kind benefits for health and education services are added to consumable income to obtain final income.

> 28 For more information on the administrative data used in each section see the annexes in Nuñez et, al. (2019).

> 29 In this version of the document, the 2010 input-output matrix was used since that for 2015 had not yet been published by DANE.

> 30 To be able to model fuel subsidies it is necessary to have the fuel reference pricing series. The work team is searching for said information to be able to model these subsidies.

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