Works by Taxes: how to advance further?

The ‘Works for Taxes’ mechanism was created by Article 238 of Law 1819 of 2016 and subsequently regulated, so that income taxpayers (legal entities) with gross income exceeding 33,610 UVT can invest up to 50% of their tax in public goods projects with high economic and social impact in the areas most affected by the conflict.

The PDET municipalities (Territorial Focus Development Programs, 170) and ZOMAC (Areas Most Affected by Armed Conflict, 344), and the Amazonian municipalities with a population of less than 85,000 inhabitants, were defined as the only potential recipients of these projects. The Ministry of Finance defines the total available quota for each budget period.

There are 11 lines of investment: energy, infrastructure (transport, cultural, rural productive, and sports), education, health, food security, climate change adaptation, water and basic sanitation, and communication technology. Resources can be executed through two channels: trust or agreement.

The mechanism, conceived within the framework of the Comprehensive Rural Reform (which never reached Congress), has functioned, but is insufficient and underutilized. Although it allows for the transfer of private sector capacities to obtain public benefits, some mayors and governors prefer to manage resources directly for political reasons, and in some cases, due to lack of capacity or will, the works are not carried out.

The approved quota has increased from $250 billion in 2018 to $1.1 trillion in 2025. Nevertheless, it represents only one-fifth of the 1% of the General Budget of the Nation (PGN), that is, an insignificant figure compared to the size of the economy.

According to the Agency for the Renewal of the Territory, between 2018 and 2024, 210 companies executed 410 projects for more than $2.9 trillion in 264 municipalities: $2.03 trillion in PDET municipalities and $932 billion in ZOMAC. By type of mechanism: $1.4 trillion via trust and $593 billion by agreement. There are transport infrastructure projects for more than $600 billion, and the hydrocarbons sector (Ecopetrol and private operators) leads the execution with 51% of the total.

The precarious situation of rurality in Colombia is an opportunity to strengthen this instrument and complement it with other elements of public policy that promote competitiveness and the formalization of regional economies.

A bill in this regard could gather majorities in Congress if it includes: 1) making the mechanism permanent, encouraging planning beyond electoral cycles and within long-term regional agendas. This is essential. 2) Significantly, gradually, and sustainably increasing the fiscal quota. Peru, for example, allocates 1.75% of its PGN, eight times more than in Colombia proportionally. And 3) allowing the 11 lines of investment to be financed interchangeably by trust or agreement. The trust has been more reliable for many companies, and its broader use would facilitate more efficient execution. Furthermore, through adequate coordination between the business sector and the state, an integrated vision of territorial development would be promoted, and Colombia could define a better regional competitiveness agenda and partially finance initiatives arising from the National Competitiveness System.

Finally, it is necessary to discuss the expansion of the mechanism to non-PDET and ZOMAC municipalities but also with deep social problems. Although half of the target municipalities have not yet executed any project, violence and social inequality are not limited to the territories defined in 2016. There are hundreds of municipalities in categories 3 to 6 that could benefit from the good use of this instrument. 86% of Colombian municipalities are in category 6, which evidences territorial lag and the opportunity to expand the scope of Works for Taxes. Solutions do exist.