Ecuador aims for average tax burden of 15%

According to the director of Ecuador’s Internal Revenue Service (SRI), the government is aiming for an average individual tax burden of 15%, up from the current 13.6%.

SRI chief Ximena Moroso says that tax collections have increased dramatically during the administration of President Rafael Correa, boosting investment in social programs and infrastructure improvements. In August, she said, collections were up 6% over those in August 2013.

Moroso, who is a Cuenca native and graduate of the University of Azuay, says that Ecuador still collects less taxes than most Latin American countries. “An example is our VAT tax, which is 12% compared to the average in the region of 14.5%,” she said. “In Europe, the VAT is often 20%, or more.”

Moroso credits the increase in tax revenue to more efficient collection methods. “Much of the increase is of taxes that have been on the books for years but that were not collected,” she said. “We have added more employees and strengthened penalties for those who do not pay.”

She defended the 5% outflow tax on money wired out of the country as essential for maintaining liquidity.

According to Moroso, the average tax on individuals has risen from 10%, when the current government assumed office to the current 13.6%. “This is because of a combination of new taxes and greater efficiency in collections. We expect the trend to continue until we reach 15%,” she said.

Photo caption: SRI Director Ximena Moroso.