Colombia - economic aspects of the country's land use

American Journal of Economics and Sociology, The,  Dec, 2000  by Fernanda Furtado

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Success in implementing of the CV, however, was measured only in terms of the amount collected, other eventual outcomes from its use being relegated to a secondary plane, if not ignored altogether. Moreover, the establishment of a firmer basis for its continued development was not seriously taken into consideration. Thus, after a period when it was at its zenith, a series of problems in the application of the CV began to emerge and to proliferate.

D. Retreat

The administration of the CV in Colombia was managed by valorization departments, which also maintained capitalization (rotation) funds for the financing of public works through the CV. These funds were constituted by income generated by the CV or derived from CV-related sources, such as the municipal shares in the works, subsidies from the National Government, financial credits, etc. In the mid-1970s, inflation, heavy expenses in connection with expropriation (condemnation) procedures, major cost overruns, and administrative inefficiency all combined to deplete the capitalization funds. This resulted in weakening the credibility and autonomy of the valorization departments that managed the funds, and (what is especially germane to this discussion) loss of confidence in the CV as a fiscal instrument. These difficulties reflect in large measure the problems generated by its standardization, which vitiated local autonomy in the establishment of political agreements. According to official data, the collection of the CV among all of the municipalities underwent a decline of almost one quarter during the decade of the 1970s, and its percentage of total municipal current revenue was reduced by approximately half. [8]

However, one must consider this first phase of the "retreat" period in relative terms, for it reflected primarily the cases of Bogota and Medellin. For instance, in Cali, which competes with Medellin for the designation of Colombia's second largest city, the CV accounted for thirty percent of municipal tax revenues at the beginning of the 1980s. Overall, its collection was still, in 1980, very important relative to other municipally-generated incomes, totaling something like half of property taxes, which constitute one of the major sources of local tax revenue, especially in small and medium cities where taxes on services are less important.

Between 1980 and 1990, the retreat entered into a second phase during which the instrument's low political attractiveness and low generation of funds fed upon each other in a vicious circle that spread throughout Colombia. By the decade's end, the collection from CV represented in national terms (comprising 900 municipalities) only around one sixth of the total property tax revenues, declining from the plateau of fifteen percent of the municipally-generated tax revenues in 1980 to around five percent in 1990, with a real decline of about twenty-seven percent. [9] In Bogota and Medellin, revenues from CV accounted for less than one tenth of property taxes in 1990.