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Conaie’s economic plan: Tax the wealthy but leave gasoline and diesel subsidies alone

According to the leadership of the Confederation of Indigenous Nationalities of Ecuador (Conaie), the solution to Ecuador’s economic troubles is simple. “Our proposal is to raise taxes on the companies and individuals who can afford to pay more,” says Conaie President Jaime Vargas. “They have never paid their fair share and it is time for this to change.”

Conaie President Jaime Vargas greets José Agusto Briones on Thursday.

Vargas delivered Conaie’s plan to José Agusto Briones, general secretary to President Lenin Moreno, on Thursday morning at the Catholic Church’s Ecuadorian Episcopal Conference Center in Quito.

The Conaie plan does not support the elimination of fuel subsidies but instead demands that the government increase efforts to stop smuggling at the Colombian and Peruvian borders. Recent studies report that about 20 percent of Ecuador’s subsidized gasoline and diesel fuel go into out-of-country vehicles at a cost of more than one billion dollars annually.

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Conaie’s plan includes one tax reduction, a two percentage decrease in the IVA tax, from 12 percent to 10 percent.

Among the tax hikes on the wealthy, Conaie wants to impose a flat five percent charge on companies that earn more than one million dollars a year and increase income tax for high-income individuals by four percent. President Lenin Moreno is proposing tax increases for both companies and individuals but at far lower rates. Conaie says its plan will raise $7 billion a year.

Vargas said that the Conaie plan protects the poor while the government’s proposals do not. “We hear much talk about taking care of the poorest segments of the population but the plans we have seen place unfair burdens on those least able to afford it,” he said. “This is why we reject elimination of fuel subsidies which directly affects transportation costs.”

He added that Coanie is not concerned with agreements the government made with the International Monetary Fund. “Our priority is the people. If they made bad deals they will have to change them.”

Although the finance ministry said Wednesday that it will propose new plans to reduce subsidies, Moreno said Thursday that no proposals will be announced without discussions with Conaie and other parties. “We made an agreement October 13 to include various social sectors in the decision-making process and we will abide by that.”

Moreno said he hoped that discussions will begin next week.

22 thoughts on “Conaie’s economic plan: Tax the wealthy but leave gasoline and diesel subsidies alone

  1. What has happened in the world that “rich” people are now cast in the role of being the caretakers and providers for other segments of the population? It isn’t the automatic job or responsibility of “rich” people to take on such tasks. It isn’t demanded by God or Nature. Why is it that people covet what other people have earned to the point of believing it is their right to demand that such things be given to them by people who have worked to provide those things for themselves? A desire to HAVE things like financial security, a nice home, nice furniture, nice clothing, getting an education, etc., is healthy. Feeling / believing / demanding that someone else simply GIVE those things to you because you want them and “others” can pay for them is a skewed world view – at least in my opinion.

    1. Could not have said it better myself Phillip. Focus needs to be on equalizing opportunity, not equalizing outcomes. Incentives matter!

    2. Problem is that no one earns anything they only believe they do … it was really all just given to them …. and is the devastation of the climate change they provided out of nice things they provided, to a few, desired a cost they should pay for …. yes

    3. Phillip. How very American of you. (wry smile) May I note that your attitude, apparently ingrained since childhood, simply doesn’t work (in spades!)? We must find better solutions.

      When you think of it, shaping a government, an economic system and an entire world so that it caters to the uberwealthy, who earn/hoard/control 1000 times more “bandwidth” than they can possibly spend seems analogous to pumping addicts full of heroin. In some crowds, betraying your friends to a narc, is an act of great kindness. And what is your take on their offspring, who never “earned” or produced much..cancelling out that justification for gobs of unneeded wealth?

      The simple fact is, that in the richest per capita countries, (who also rank as the happiest) the social system works better, the infrastructures are amazing and yes, everyone has a chance at their dreams…something which has died in the US and the UK. 🙁 And finally these places still have godzillionaires. They should be examined closely for hints for something better for all of us.

    4. The problem is that the world has changed since 1850. There is no longer a level playing field. If you grow up in a poor family in a poor neighborhood you are likely to be poor the rest of your life. If you grow up in a privileged household, with all kinds of things handed to you, you will likely do quite well. It doesn’t mean you are smarter or more deserving.

    1. As this working paper implies, there is plenty of money to compensate the poor and still have a billion left over for deficit reduction. The colossal failure, it seems to me, was that the government didn’t inform the affected parties sufficiently. Also, the policy makers didn’t have the replacement transfer program to make poor people whole, vouchers, whatever, in place ahead of the decree. The more affluent will pay more and the smugglers will be unemployed once the subsidies are eliminated.
      Schaffitzel, Filip & Jakob, Michael & Soria, Rafael & Vogt-Schilb, Adrien & Ward, Hauke. (2019). Can government transfers make energy subsidy reform socially acceptable? A case study on Ecuador. 10.18235/0001740

    2. You are quite right. Taxing the rich is not enough.. The entire nation has a problem and the entire nation must change to fix that. Beginning with the rich is a big winner for everyone else and softens them up for the inevitable. Tax the rich, and then decrease the subsidies on fuel slooowwwllllyyyy…like the IMF recommended behind closed doors.

      But that is defensive only. IMHO, there also has to be offensive initiatives. The list is endless. Stop shipping raw cocoa. There is a world shortage for chocolate. But Ecuador, with the best cocoa in the world, makes almost nothing from it. Hire some Swiss and Belge expertise, and taste (pun!) some of the 98% of the chocolate revenue sent abroad.

      Ditto with coffee…where South America Arabicas (my favourites) are also in a shortage and endangered. I am a coffee affectianato. My European friends turned me onto Nespresso 30 years ago. I spend a small fortune on coffee, which comes from this part of the world, is shipped in bean form to Switzerland, is processed, shipped to Toronto, where I buy it to be send to Montreal and then our mountain summer home. I then lug it down here, where it all started from..about 1000 capsules at a time @ 75 cents a capsule of which the original farmer that grew it makes 1 penny…and watches his family starve.

      Sorry for being a bit off topic, but economic wisdom does not start and end with taxes.

  2. Tax the rich, blah, blah, blah. What a tired, weak, ineffective strategy. Get a life. Can’t socialist mental midgets come up with something more creative?

    1. Yes, universal basic income UBI …. paid for with the VAT and the profits from natural resources (oil in Ecuador and internet data in the USA) the rich lazy azz people evade their responsibilities for their positions by evading increased taxes illegally. The blah blah blah approach is simplistic. Do the MATH ….

      1. Well, it wasn’t the French. It was the international Freemasons. But that’s another story, isn’t it?

        1. Madam? The Pope banned the Free Masons before the French Revolution. However, the French Parliament refused to enact it AFTER the Revolution. It was a powerful force until 1904 when the infamous L’Affaire des Fiches occurred. Your comment is in error.

      2. That is inevitable. History always shows that when the GINI, (an economic measurement of national income disparity) gets to the point it is now in some countries, the people rise up and remove heads. It is more reliable than weather prediction. (The heads are harvested from those the populous BELIEVES are real wealth necessary.)

        I would prefer that NOT to happen. But there are a LOT of people like Phillip Stephens who will vociferously stand up for ways that can only lead to the guillotine, time and time again. And don’t expect the military of the police to stop it happening, they come from the have-not side as well. In ALL popular revolutions, we see that most won’t shoot their fathers, mothers, and family to defend the status quo.

  3. Why lower IVA? This only benefits the rich. Simply put the rich make way more purchases than those who only make minimum wage. Therefore they pay more sales tax. If you buy a sofa worth 2k you would pay ten times more tax than someone paying $200.00.

    1. I understand what you’re saying. Also, on average the folks with less money eat and do their shopping in places that don’t even charge an IVA tax.

    1. John, If you could convince all of this audience that each new leader inherits the structure and consequences of the actions, (good or bad) of their immediate predecessor, you would go a LONG way in improving the dialogue here. It takes 2-3 years for the older measures to wear off, even if the current leader is trying as hard as he can to reverse that.

      1. Yet nobody sees the absurdity of Democracy —- a president is elected. He has four or six years to do a lot of harm. Then another, good president is elected who spends all of his time undoing the harm that was done and there it goes back and forth. Anybody who believes in the electoral process needs to have his head examined.

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