Colombia - Works for Taxes

Colombia’s Work for Taxes (WfT) program, initiated in 2017, allows corporations operating in the Zones Most Affected by the Armed Conflict (ZOMACs) to undertake infrastructure projects in exchange for tax reductions. This initiative aimed to rapidly deploy resources to rural areas, leveraging the private sector’s capabilities to rebuild regions impacted by the FARC-EP conflict. Companies propose projects that improve local conditions, and upon government approval and project completion, they receive tax deductions up to 50% of their total tax liabilities. The program was designed to overcome bureaucratic inertia and foster better relations between businesses and local communities.

By 2019, the program faced several challenges. There were concerns that businesses might exploit their superior local knowledge to undertake less impactful projects that primarily benefited them. The government’s limited ability to monitor projects in remote areas further complicated oversight. Additionally, companies were wary of the financial risks, including potential non-compensation by the government and additional costs not covered by the tax rebate. To address these issues, the government introduced changes in 2019, such as issuing tradable tax relief bonds on a percentage of completion basis and allowing collaboration between companies and the government. Despite these adjustments, questions remained about the program’s scalability and long-term viability, with some observers suggesting it might be more effective as a temporary measure rather than a permanent solution.