Some Considerations on the Value-Added Tax in Colombia

Revista de Economía del Rosario, Vol. 10, No. 2, December 2007

18 Pages Posted: 5 Feb 2008

See all articles by Christian R. Jaramillo

Christian R. Jaramillo

Universidad de los Andes

Jorge Tovar

Universidad de los Andes, Colombia - Department of Economics

Abstract

This paper discusses the way in which the Colombian Tax Code determines the taxable base of the value added tax (VAT). Our analysis shows that the Colombian legislation fails to exploit some of the theoretical advantages of the tax, as it induces cascading and distortions of input prices in production. We carry out a numerical simulation to illustrate the magnitude of these inefficiencies and show that while the Colombian VAT is clearly superior to a general sales tax, it is inferior to the theoretical implementation of the VAT. Additionally, we show that under a VAT applied across the board the Colombian and the theoretical implementation yield equal real tax revenues but different price level adjustments.

Note: Downloadable document is in Spanish.

Keywords: value added tax, tax incidence, tax cascading, Colombian Tax

JEL Classification: H21, H22, C15, K34

Suggested Citation

Jaramillo, Christian R. and Tovar, Jorge, Some Considerations on the Value-Added Tax in Colombia. Revista de Economía del Rosario, Vol. 10, No. 2, December 2007, Available at SSRN: https://ssrn.com/abstract=1090231

Christian R. Jaramillo (Contact Author)

Universidad de los Andes ( email )

Cra 1 No 18A-10
Of. 310 Ed. A
Bogotá
Colombia
(+57 1) 339 4949 x 2439 (Phone)
332 4021 (Fax)

HOME PAGE: http://economia.uniandes.edu.co/html/home/home.php

Jorge Tovar

Universidad de los Andes, Colombia - Department of Economics ( email )

Carrera 1a No. 18A-10
Santafe de Bogota, AA4976
Colombia

HOME PAGE: http://economia.uniandes.edu.co/profesores/planta/tovar_jorge

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