Colombia’s Missing Fiscal Pact: The Political and Cultural Foundations of Weak Taxation

Leopoldo Fergusson

No 2025-39, Documentos CEDE from Universidad de los Andes, Facultad de Economía, CEDE

Abstract: This paper argues that Colombia’s taxation problems reflect a deeper political economy equilibrium shaped by extractive institutions, extreme inequality, and cultural norms that favor individual solutions over collective ones. Historical legacies produced a weak and often distrusted state, which in turn fostered social norms that legitimize rule bending, low tax morale, and clientelistic exchanges. These institutional and cultural arrangements proved mutually reinforcing for decades. Since the 1990s, however, political openness expanded inclusion and triggered greater demand for public goods. The result has been a more responsive state, yet one constrained by persistent political inequality, clientelism, low trust, and reluctance to fund public spending through broad taxation. The mismatch between rising expectations and limited fiscal capacity has now produced a fragile and increasingly untenable fiscal position. Colombia faces a critical choice: renew its fiscal pact on new, more consensual terms or risk recurring crises and democratic erosion as an expensive but ineffective state structure constrains long-run development.

Keywords: Taxation; State capacity; Inequality; Political economy; Clientelism; Social norms; Colombia; Fiscal policy; Institutional change; Public goods (search for similar items in EconPapers)
JEL-codes: H11 H20 N16 O17 P48 (search for similar items in EconPapers)
Pages: 44
Date: 2025-11
New Economics Papers: this item is included in nep-his, nep-lam, nep-pbe and nep-soc
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Persistent link: https://EconPapers.repec.org/RePEc:col:000089:021810

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