Valorization Tax (Contribución de Valorización)

Overview

Valorization tax (contribución de valorización, CV) is Colombia's version of a betterment levy or special assessment: a lump-sum charge imposed on the owners of properties that benefit from a specific public works project, calculated to recover some or all of the project's cost. It has been collected in Colombia since 1921, and Bogotá has used it intensively since the mid-twentieth century to finance roads and urban infrastructure — by the late 1960s the levy accounted for roughly 16% of Bogotá's total municipal revenue (and 45% in Medellín), and it still made up about 24% of Bogotá's revenue in 1993.[1] Fred Harrison cites Bogotá's valorization tax in The Power in the Land as an example of event-based land value capture, distinct from an annual land value tax (Ch. 17, pp. 221–222).

Unlike a recurrent land value tax, valorization is triggered by a specific project rather than assessed annually on all land, and — in Bogotá's version — it is apportioned across affected properties using benefit factors (e.g., improved access) capped by the total project cost, rather than by directly appraising each property's value uplift the way Medellín's model does.[1]

How It Works

Colombian law sets three parameters for calculating the levy: the cost of the project, the value added to benefiting properties, and the affordability of the charge to owners, with the levy bounded by the lowest of the three (Law Decree 1604 of 1966).[1] Two methodologies have developed:

• The Bogotá model treats the levy as closer to a general tax earmarked for public works: it allocates the project's cost across affected properties using benefit factors (such as improved mobility) rather than appraising the specific value each property gained.
• The Medellín/Manizales model more closely tracks the land value capture principle: it appraises the actual value added to each property by the project (a "dual appraisal" method) and distributes the charge accordingly, factoring in ability to pay.

Administration in Bogotá sits with the Urban Development Institute (Instituto de Desarrollo Urbano), which also selects the road projects the levy funds.[1]

See Also

• Betterment Levy — the broader category of event-based land value capture this tax belongs to
• Land Value Capture — the family of instruments valorization tax is a member of
• The Power in the Land — Harrison's discovery-source discussion of valorization tax (Ch. 17)
• Land Value Tax — the recurrent, annual alternative valorization is often contrasted with

Sources

1. Oscar Borrero Ochoa (2011), "Betterment Levy in Colombia: Relevance, Procedures, and Social Acceptability," Land Lines, Lincoln Institute of Land Policy, April 2011, pp. 14–21 — used for the CV's 1921 origin, the Bogotá and Medellín/Manizales assessment models, the revenue-share figures (16% Bogotá / 45% Medellín in the late 1960s, 24% Bogotá in 1993), and the three statutory parameters under Law Decree 1604 of 1966. PDF
2. Fred Harrison (1983), The Power in the Land: An Inquiry into Unemployment, the Profits Crisis and Land Speculation, Ch. 17, pp. 221–222 — discovery source citing Bogotá's use of valorization taxes for urban infrastructure since the 1950s, discussed alongside other land value capture instruments. Publisher page