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OECD's 2015 Economic Survey of Colombia examines recent economic developments, policies and prospects. Special chapters cover taxes and transfers and pensions.

Tax revenues at 20% of GDP remain low compared to other Latin American countries and the OECD average and tax evasion is pervasive. Lower oil revenues and the expiration of a number of taxes are putting strains on the budget at a time when social and development spending needs are rising. Heavy reliance on corporate income taxes reduces investment. At the same time, the redistributive impact of taxation is reduced because most of income and wealth taxes are paid by firms rather than households. Therefore, Colombia needs a comprehensive tax reform that boosts revenues and shifts the tax burden to support more inclusive and green growth. Tax loopholes and exemptions that reduce the tax base and favour mainly the rich should be reduced significantly. Strengthening the tax administration will help reduce evasion.

Colombia is one of the most unequal countries in Latin America. The high level of informality in the labour market and many characteristics of the pension system leave many elderly in poverty. Only formal-sector employees earning more than the relatively high minimum wage are covered. Linking benefits to at least the minimum wage makes the system costly and reduces the provision of annuities by insurance companies as it is difficult to insure against changes in the minimum wage. The Government has recently introduced a matching-contribution scheme (BEPS) for informal workers and vulnerable retiring aged people who have not contributed enough to be entitled to a pension. Moreover, the coverage of the old-age minimum income support has been extended but at the cost of lowering the already modest benefits. More reforms in the pension system are needed to extend coverage while eligibility to the BEPS and the minimum income support should be expanded to guarantee old-age income for more Colombians. In the medium term an in-depth pension reform is required.

This Survey is published on the responsibility of the Economic and Development Review Committee (EDRC) of the OECD, which is charged with the examination of the economic situation of member countries.The economic situation and policies of Colombia were reviewed by the Committee on 12 November 2014. The draft report was then revised in the light of the discussions and given final approval as the agreed report of the whole Committee on 3 December 2014.The Secretariat’s draft report was prepared for the Committee by Christian Daude, Christine De la Maisonneuve and Guillaume Bousquet under the supervision of Piritta Sorsa. Editorial support was provided by Anthony Bolton, Inés Gómez Palacio and Mikel Inarritu. The Survey also benefitted from contributions by Bert Brys, Jane Korinek, Laurent Lambert, Sarah Perret, Julien Pascal, Mikaela Rambali and Virginia Robano.The previous Survey of Colombia was issued in December 2012.

This annex reviews action taken on recommendations from previous Surveys. They cover the following areas: macroeconomic policies, improving income distribution and boosting economic growth, facilitating the economy’s adjustment to the commodity boom, boosting employment in the formal sector, improving the institutional and regulatory business environment, improving infrastructure and addressing fiscal challenges. Each recommendation is followed by a note of actions taken since the January 2013 Survey. Recommendations that are new in this Survey are listed in the relevant chapter.