Tax cuts for companies in Colombia could boost long-term growth.
The article analyzes how changes in Colombia's tax system affect growth, welfare, and income distribution using a model. Three scenarios are considered: increasing VAT, extending VAT to all products, and decreasing corporate tax while increasing personal income tax. The findings show that compensating for tax changes can prevent lower-income households from losing welfare. Shifting from taxing production to taxing results can encourage capital accumulation and promote growth without harming the tax system's progressivity.