Business owners complain about new import tax, call it a return to Correa-era tax policy

Nov 14, 2017 | 18 comments

Although the government says that new import taxes that went into effect yesterday will have minimal impact on consumers, Ecuadorian businesses say it’s too early to tell. They also complain that the taxes represent a return to the policies of former president Rafael Correa and contradict President Lenin Moreno’s pledge to provide relief to the private sector.

The customs service began applying the new import tax yesterday.

The tax applies to 375 items that the government says will raise $900 million a year to help combat smuggling and to keep U.S. dollars in the country.

Of immediate concern for importers is figuring out exactly how much the new taxes will cost them. The taxes are based on complicated formula in which a “control unit” determined by the weight of products is multiplied by 10 cents. Business owners complain, however, that they cannot determine the tax per item since the customs office has set weights that often far exceed their own calculations.

“The way they decide on the tax is crazy,” says Cristina Álvarez, administrator of the Importadora Aliap in Guayaquil. “No one outside of the customs office understands it and they refuse to provide a list that shows the tax by product item.”

Mauro Andino, customs director, agrees the formula will be confusing at first but says importers will quickly understand it. “There are always complaints about a new system of charges and this is no different.”

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The government has offered a short list of what the tax will add to the cost of imported products, including $5.50 for a 32-inch television and 48 cents for a pair of women’s shoes.

Some importers say that the examples are deceptive and put a “good face” on the new taxes. “In general, the tax will add at least 5% to 8% to final costs but I’ve seen some cases that are much more,” says Álvarez. “At this point, we are just waiting to see the values that are assigned as products come into port.”

Like the importers, some members of the National Assembly complain that the new tax is a “regression” to the tax policies of the Correa administration. “I thought we had moved beyond that, but here we are again,” said Assemblyman Henry Kronfle. He also said that the government had made the tax formula too difficult for businesses to figure out.

On Monday, a judge in Guayaquil rejected a petition by three importers to delay implementation of the new tax.

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