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Fiscal Reform in Colombia: Problems and Prospects.

Article Excerpt
Fiscal Reform in Columbia: Problems and Prospects. Edited by Richard M. Bird, James M. Poterba, and Joel Slemrod. Cambridge, MA: The MIT Press, 2006, pp. 329.

Fiscal reform is certainly not a new subject for Colombia. Some of the best public finance thinkers around have contributed to a rich literature on the subject over the last several decades. These authors include Bird (1970), McLure and Zodrow (1997), Musgrave and Gillis (1971), and Shome (1995), among others. So, one might question the need for a new edited volume on fiscal reform in Colombia.

This edited volume is in fact testimony to the continuing need for hard analytic study of public finances. In a time when the integration of the world economy proceeds at a rapid pace, it is critical to evaluate and re-evaluate the issue of whether the tax structure is in sync. The new questions have to do with the impacts of tax policy on government deficits and long-term financial stability, foreign domestic investment, migration, and capital accumulation. Just as important is the effect of these factors (and trade liberalization) on optimal tax policies.

In a series of nine chapters in this edited volume, the authors provide background analysis, and evaluate reform options with respect to a number of key policy areas, including public debt, tax administration, taxation of capital and labor, and fiscal decentralization. The result is a wonderful compilation of reviews of the state of the practice in international public finance, and detailed analyses of the current situation and reform prospects for Colombia, based on up-to-date data, theory, and analytical techniques. The editors and authors include many of the leading authorities on taxation in the world. This book is an important addition to the literature on "doing tax reform" in developing countries.

The level of taxation in Colombia is similar to that of other middle-income countries. Colombia has held its public-sector debt in check until recent years, when it grew from 17 percent of GDP to 56 percent. Chapter 2 of the book identifies the precarious fiscal position of the country and the important interactions among...