Agreement with the U.S. will allow Ecuador to collect billions in back taxes and penalties
Under an agreement signed in April with the U.S. government, Ecuador may be able collect billions of dollars in unpaid taxes as well as penalties for money transferred out of the country illegally. According to the Economic Commission for Latin America, between $20 billion and $40 billion in untaxed funds were moved out of Ecuador in the last 10 years, with 65 percent of it deposited in the U.S. banks.
Although President Guillermo Lasso has pledged not to raise taxes, he has said he will aggressively pursue money illegally transferred out of the country as well as unpaid taxes. “If the laws are followed, the government should collect at least $3 billion more per year than is currently collected,” he says. “Such collections would go a long way to closing our budget gap.”
In addition to back taxes on money transferred illegally to the U.S., the government will be able to apply penalties that could result in billions of additional dollars in collections. Ecuadorians convicted of tax evasion are also subject to imprisonment.
Napoleón Santamaría, lawyer and partner at Santamaría Abogados tributaristas, says it is not illegal to have off-shore bank accounts as long as they are reported in tax filings and taxes are paid on transfers. “However, if money is moved offshore without reporting, it is subject to fines as well as taxation and even to confiscation, not to mention criminal penalties for its owners. This is an extremely serious offense.”
Under the agreement with the U.S. Treasury and Internal Revenue Service, Ecuador and the U.S. will share taxation and banking information about citizens of the two countries.