Tax Returns and Income. A DIAN Study for Colombia.

In some economic forums such as those of the World Bank, the CAF and the IDB, the issues of inequality and poverty in the countries of Latin America and Africa are discussed and policies are formulated to solve them by their respective governments. Measures of inequality such as the Gini coefficient are frequently used, which in those countries is higher because it shows that inequality is greater compared to the countries of Europe and North America.

Colombia has a high Gini coefficient of around 0.55, above the other OECD countries, only surpassed by some Central American and African countries. There is also the measurement of income and monetary poverty made by the official source of information in Colombia based on the national household survey, which yields the result of monetary poverty of 37% of the population for the year 2.022.

Another way to observe the inequality of income and wealth in Colombia is what was done in a recent study prepared by the DIAN (national tax directorate) based on the income tax returns of natural persons, where the results for adults in terms of wealth called liquid assets, also in monthly income and in income from work.

For the year 2.021, the subject of the study, the requirements from which natural persons had to submit the income tax return were $162 million in assets and $42 million in annual income or $3.5 per month.

In fact, the results show that of the population of adults over 18 years of age, which in Colombia is 37 million by 2.021, 5% or 1.9 million of these adults have a wealth of $162 million or more, which also corresponds to their average income monthly from $6.9 million and of which in average monthly labor income from $3.5 million.

By going up the pyramid of wealth and income and taking not 5% but only 1% of this adult population, we obtain that only 369.729 people have wealth from $649 million, average monthly income from $20.9 million and income of work that starts from $10 million.

Even higher, taking only 0.1% of adults, we obtain that 36.972 people have wealth starting at $2.784 million, average monthly income starting at $94.9 million, and average monthly labor income starting at $29.8 million.

Almost at the top, taking only 0.01% of adults, 3.697 people have wealth starting at $9.579 million, an average monthly income of $454.3 million of which average monthly work income starting at $71.8 million.

The document of the DIAN shows the pyramid of wealth and income of natural persons for which they use the income tax returns of this taxpayers. Pyramid that is wide in population at the base, that is, in the lowest values of wealth, which are the levels from which people must present said declaration and from the minimum income levels to declare.

To the extent that the values of wealth and income increase, the number of people corresponding to each level decreases. In effect, from 1.9 million people at the base of the pyramid with the lowest levels of wealth and income, there are only 3.697 people at the top with the highest levels of wealth and income.

It must be clarified and complemented that according to official sources the legal minimum salary for the year 2.021 was $908.526, obviously lower than the average monthly income from which there was the obligation to present the income tax return in that taxable year, which was $3.5 million as mentioned above. Also, according to official information, 56% of workers (about 12 million) earned one minimum wage or less and another estimate was that 80% received less than two minimum wages, 17 million out of a total of 21.9 million workers.

All the above allows us to see the differences in income between workers with minimum wage or less, those with two minimum wages and those with the base income to file an income tax return of $3.5 million and from then on with the population of income from work and the highest total income until reaching the highest. It is a range that goes from less than a monthly legal minimum wage (it is largely informality) to $72 million average monthly according to income tax returns.

Therefore, by including workers earning one or two minimum wages, the population pyramid in terms of income becomes wider at the base than when only workers who file income tax returns are considered, which reflects high inequality of income in the country, where there are many inhabitants with low incomes and fewer with high incomes and wealth equally distributed on the heads of a smaller number of inhabitants. This is what is presented and questioned by all the international organizations mentioned at the beginning of this note about the countries of Latin America and Africa and by private and public analysts and researchers.