A new analysis released by the Observatorio Fiscal de la Pontificia Universidad Javeriana reveals that Colombian municipalities remain heavily dependent on the central government for funding, with 50% of their total income derived from national transfers. The report highlights a significant lack of fiscal autonomy, particularly among smaller municipalities, and points to structural disparities in local revenue generation for the year 2024.
According to the data presented by the university, total territorial income in Colombia reached $197.5 trillion COP in 2024. Of this aggregate figure, municipalities accounted for $146.5 trillion COP, while departments received $51 trillion COP.
Readers may download the report (in Spanish) by clicking here.
The breakdown of these municipal funds indicates that transfers from the nation were the primary source of liquidity, totaling $72.8 trillion COP. Own-source revenue (resources generated locally) amounted to $49.6 trillion COP (34%), while capital resources contributed $24.1 trillion COP (16%). The observatory notes that this structure demonstrates a high dependence on conditioned resources, which limits the ability of local governments to make independent fiscal decisions.
Disparities in Local Revenue GenerationThe report emphasizes that fiscal autonomy is directly linked to the generation of own resources, which totaled $49.6 trillion COP for the period. Of this amount, 86% corresponded to tax revenues and 14% to non-tax revenues. However, the distribution of these funds is highly uneven across the country’s 1,103 municipalities.
Only municipalities classified as “Special Category”—typically major urban centers—finance more than half of their budgets through own resources. In contrast, municipalities in categories four through six, which often represent smaller or rural towns, generate only 15% to 20% of their funding locally. The Pontificia Universidad Javeriana researchers attribute this gap to differences in economic and administrative capacities between regions.
Taxation and Structural ChallengesIn terms of tax revenue, municipalities collected $42.7 trillion COP in 2024. The Industry and Commerce Tax (ICA) was the largest contributor, generating $17.2 trillion COP (40% of tax revenue), followed by the Property Tax (Predial) at $12.4 trillion COP (29%).
While these two taxes are the primary revenue drivers for larger cities, their weight diminishes significantly in smaller municipalities. In these areas, local governments rely more heavily on gasoline surcharges and “estampillas” (fiscal stamps), which can sometimes constitute the primary source of tax income. The observatory warns that outdated cadastral (property) valuations and the heterogeneity of the ICA tax structure continue to limit the efficiency of the territorial tax system.
Non-tax revenues, such as fines, fees, contributions, and the sale of goods and services, totaled $6.9 trillion COP. These sources are particularly critical for category four through six municipalities, helping to offset weaker tax collection capabilities.
Dependence on the General System of Participations (SGP)The report provides detailed statistics on the extent of reliance on the General System of Participations (SGP), the main mechanism for national transfers. In 2024, the SGP contributed $46.1 trillion COP, representing 63% of all national transfers.
The level of dependence is widespread:
- In 695 municipalities, the SGP represents at least 40% of total income.
- In 332 municipalities, it represents 50% of total income.
- In 95 municipalities, it accounts for more than 60% of total income.
While recent reforms to the SGP are expected to increase these resource flows, the observatory states that the positive impact will depend on improved management capacity and the avoidance of budget under-execution in smaller jurisdictions.
Capital Resources and Budget ExecutionA key concern raised in the report is the composition of capital resources, which reached $24.1 trillion COP. These funds are dominated by “recursos del balance”—unexecuted balances from previous fiscal years—which represent 55% of the total capital resources. The high prevalence of these rollover funds suggests a low capacity for budget execution in a large portion of Colombian municipalities.
The Observatorio Fiscal concludes that the combination of high transfer dependence, weak local revenue generation, limited credit access, and low budget execution restricts local autonomy and deepens economic gaps between municipalities. The organization suggests that strengthening tax collection and administrative capabilities are essential steps toward effective fiscal decentralization.
Above photo: Bucaramanga skyline (Photo © Loren Moss)
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