Businesses protest new law that raises taxes on gas appliances and eliminates tax deductions for ‘junk food;’ it goes into effect January 1

Only days after final debate in the National Assembly, a new law that imposes a 100% special usage tax on gas appliances and eliminates the VAT tax on electric stoves and cooktops, becomes effective January 1.

Businesses claim that new tax on gas appliances removes individual choice.

Ecuadorian business organizations say it is another example of the government’s anti-business agenda and a blow against individual freedom of choice.

The law, called the Production Incentives and Tax Fraud Prevention Act, was signed by President Rafael Correa the day after it was passed by the Assembly last week, and was published in the government’s legal registry, the Official Gazette, yesterday.

In addition to the appliance tax measures, the law eliminates business tax exemptions on “junk food” and other products it considers “unhealthy,” offers a number of new incentives for business expansion and investment, clarifies previous rules about buying and selling corporate stocks, and tightens the requirements for tax deductions for residents over the age of 65. The government says the measures will save the country $200 million annually.

Ecuador’s Chamber of Industries and Production (CIP) calls the new law bad for business and says that the incentives for business development are more than offset by the new taxes and elimination of tax deductions.

“What we need is a tax structure that we can count on,” said CIP president Richard Martinez. “Instead, what we have is a situation that changes almost every day. Why would a business want to invest or expand in this climate?”

Martinez: “What we need is clear, predictable and stables rules that actually encourage investment and expansion. The private sector is seeing increasing amounts of regulation and seems to be viewed by the government as the enemy.”