Colombia's difficult fiscal situation

Abstract

When analyzing a country's fiscal policy, it is necessary to take into account its two components: on the one hand, the State's income, which is basically determined by the existing tax structure and, on the other hand, public spending, which makes up the General Budget of the Nation. While it is true that the two components are formulated and designed by the Ministry of Finance, their approval corresponds to Congress, since they are laws of the Republic. As is known, the tax structure is defined by Law 2277 of 2022, approved in December of the same year. In 2024, the amount of tax revenue collected was insufficient for the following reasons: low economic growth in 2023, which was barely 0.6%; the high advances on income taxes for 2024 that were paid in 2023; the insufficient resources that were going to be collected, derived from the resolution of disputes between taxpayers and the DIAN; the decision of the Constitutional Court on the deductibility of royalties from mining companies, among other factors. Given that tax revenues in 2024 were insufficient for the reasons noted above, on November 27 of the same year, the National Government made a cut to the expenditure budget for that year by $28.4 billion.