Mayors from three of Panama’s largest districts are demanding the national government transfer approximately 500 million dollars in outstanding property tax revenues. The municipal leaders from Panama, Colon, and San Miguelito accuse the Ministry of Economy and Finance of withholding funds legally designated for local governments, warning that the shortfall is crippling community projects and essential services. This financial dispute, which has simmered for years, reached a new intensity during recent national budget hearings where official figures revealed the massive gap between taxes collected and funds transferred.
El reclamo de los municipios al Gobierno: $500 millones que nunca llegaron del impuesto de bienes inmuebles
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Official statistics presented to the National Assembly’s Budget Commission show a consistent pattern of underfunding since 2021. Between 2021 and 2026, the Panamanian state collected 1.107 billion dollars from the Property Tax, known locally as the Impuesto de Bienes Inmuebles (IBI). During that same period, the government transferred only 618 million dollars to municipalities. This leaves a difference of 489 million dollars that never reached local governments despite clear legal mandates requiring full transfer of these specific revenues.
“Those taxes that citizens already pay are not reaching the municipalities, neither Colon’s nor Panama’s. The law says these funds must be transferred in their entirety,” said Panama City Mayor Mayer Mizrachi during a public event in the Don Bosco district. [Translated from Spanish]
Mizrachi emphasized that local governments serve as the first point of contact for communities, making reliable funding critical for responsive governance. His comments reflect a growing frustration among municipal leaders who say they are being starved of resources needed to fulfill their legal obligations to residents.
Legal Framework Versus Fiscal Reality
The conflict centers on Article 40 of Law 66 of 2015, which mandates that municipalities must receive all resources from property tax collections from the immediately preceding year, including any associated fines and surcharges. The mayors argue this law is being systematically violated by the central government’s budgeting practices. Instead of using actual collection figures from the previous year, the Ministry of Economy and Finance (Panama) bases its transfers on conservative estimates made before the previous fiscal year closes.
This approach creates significant discrepancies. In 2024, for instance, property tax collections reached 201.2 million dollars, but the ministry allocated only 70 million to municipalities, representing just 35 percent of actual revenues. Projections for 2026 show a slight improvement but still fall short, with anticipated collections of 196.4 million dollars against a planned transfer of 83.1 million, equaling 42 percent of the total.
Colon Mayor Diogenes Galvan specifically referenced the older Law 32 of 1997, which requires that all property tax revenue generated within his district be entirely transferred to the municipal investment budget. The consistent underfunding has prompted the Panama Municipal Council to publicly support the mayors’ calls for legal compliance and proper management of property tax funds.
Impact on Local Services and Decentralization
The financial shortfall has tangible consequences for district residents. Mayors warn that the liquidity crisis compromises their ability to execute community projects and maintain essential programs. From road repairs and public safety initiatives to sanitation services and community centers, numerous local improvements face delays or cancellation due to budget constraints. This situation directly impacts the quality of life for citizens who depend on these municipal services.
San Miguelito Mayor Irma Hernandez amplified these concerns in her own address to the National Assembly, questioning the centralization of public fund management. She argued that municipalities and community boards provide the most immediate response to population needs. “We are an unequal country because we centralize power,” Hernandez stated, reinforcing her position nearly a year after first raising the issue. [Translated from Spanish] Her comments highlight the broader political struggle over Decentralization in Panama’s governance model.
“The law is clear: the collected funds must reach the municipalities in full. The opposite is weakening decentralization,” warned Deputy Neftali Zamora of the Vamos coalition, who also sits on the Municipal Affairs Commission. [Translated from Spanish]
Zamora insisted this is not about money for city halls themselves but rather resources destined for citizen participation projects that are now failing to materialize properly. His involvement signals legislative support for the municipalities’ position and indicates the issue spans both executive and legislative branches of government.
Government Defense and Economic Context
During the Budget Commission debate, Valery Gonzalez, representing the Ministry of Economy and Finance, defended the government’s procedure. She explained the practical challenges of budget planning that contribute to the discrepancies. “The recommendation for the IBI amount is made at the beginning of each year, before the previous fiscal year closes, so we can only work with estimates,” Gonzalez stated. [Translated from Spanish]
This technical explanation underscores the procedural gap between legal requirements and budgetary realities. The ministry must prepare transfer figures before final collection numbers are available, creating an inherent tension between precise legal compliance and practical fiscal management.
Gonzalez also provided economic context for the funding issues, noting that in 2023, during the previous administration, tax collection fell due to delinquent portfolios exceeding 830 million dollars. This forced the government to adopt temporary measures to recover revenues. Among these measures was the approval of Law 401 in October 2023, which allowed for advance collection of taxes corresponding to future periods. These recovery efforts, while necessary for national fiscal health, have apparently come at the expense of municipal funding streams.
The situation reveals a fundamental conflict in Panama’s public financial management. National economic stabilization measures appear to be directly impacting legally mandated local government funding. This creates a zero-sum game where central government fiscal recovery undermines municipal financial stability.
With nearly half a billion dollars in dispute and legal mandates hanging in the balance, Panama’s municipalities continue their fight for what they consider their rightful share of national revenues. The outcome will significantly influence the balance between central and local power while determining whether communities receive the services and projects their property taxes are supposed to fund. The resolution of this standoff will test Panama’s commitment to fiscal bienes inmuebles policies in practice, not just in legislation.