Latin America 22.8 percent, Ecuador 19.9 percent, Argentina 30.3 percent, Brazil 32.3 percent, and Uruguay 30.9 percent.<sup>3</sup> Colombia has submitted to the Congress 15 interventions in its tax system during the last 29 years to achieve balance in its public finances. These reforms have made different adjustments to the country's tax system, such as the VAT increase from 10 percent in 1990 to 19 percent in 2017 and the inclusion of a 5 percent rate for certain goods such as prepaid medical plans, and certain cured meats. Likewise, the equity tax was increased from 0.3 percent in 2004 for persons whose assets exceeded $3,000 million, to 1 percent for people whose assets exceed $5,000 million and 1.5 percent for those with equity exceeding $8,000 million. Reforms, among others, included an increase in the taxable base on income and the creation of new taxes, such as the CREE firm tax, and its subsequent elimination in 2018.<sup>4</sup> The latest tax reform considers that net collections in 2019 represent 14.3 percent of GDP, and the difference between income and expenses, that is, the fiscal deficit for 2019, is forecast to be on the order of 2.4 percent of GDP.

The work done to date that seeks to study the distributive impact of fiscal policy in Colombia found that, on the one hand, indirect taxes were regressive and contributed to the increase in inequality, while direct taxes and transfers contributed to a reduction of the same. Lustig et al. (2014) found that the redistributive impact of taxes and transfers in Colombia is relatively low compared to other developing countries.

Although these efforts have been beneficial, none of them include the cascading effect that products excluded from VAT payment have. Additionally, in the preceding studies, general assumptions have been made, such as non-payment of VAT in rural areas. Given that VAT is one of the primary sources of tax collections in the country, the inclusion of the cascade effects of products purchased in informal places as well as of goods excluded from payment are relevant for the study of the redistributive impact of the tax system in Colombia. Additionally, in previous studies, it was not possible to include all the social programs that the national government has. This last was because the publicly available data up to that time did not contain such information. This work seeks to fill these gaps to aid in a more complete and informed public policy discussion.

At the end of 2018, the National Statistical Office (DANE) published the National Household Budget Survey (ENPH). This survey has both an expenditure module and an income module. It is important to emphasize that the expenditures module is very detailed. The last survey of this type carried out in Colombia was the Income and Expenditures Survey of 2006. However, given the different tax reforms applied since then and the variation of household spending patterns, the latest fiscal impact studies carried out for Colombia have used the 2010 Quality of Life Survey, since this survey contains both an expenditures module and an income module. However, this survey's expenditures module is much more in the aggregate than that found in the current ENPH, which limits the extent of the analysis.

Given the novelty and relevance of the data, the ENPH is one of the main inputs for the work presented here. The information in this survey is complemented by public information, sourced from different instances such as the Ministry of Finance and Public Credit, the Utilities Information System, and the National Statistical Office, among others. It is important to note that, given the nature of the household survey, the study does not cover taxes applied to companies and VAT paid by the government or non-

> 3 All the figures mentioned here were taken from OECD et al. (2017), _Revenue Statistics in Latin America and the Caribbean 2017_ , OECD Publishing, Paris, https://doi.org/10.1787/rev_lat_car-2017-en-fr.

> 4 The laws that frame the different tax reforms since 1990 are: Law 49 of 1990; Law 6 of 1992; Law 223 of 1995; Law 488 of 1998; Law 633 of 2000; Law 788 of 2002; Law 863 of 2003; Law 1111 of 2006; Law 1370 of 2006; Law 1430 of 2010; Law 1607 of 2012; Law 1607 of 2013, Law 1607 of 2014; Law 1819 of 2016 and finally Law 1943 of 2018.

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