IMF requires Ecuador to increase tax revenue but tax on sending funds out of the country will end

Mar 1, 2019

Although many of the conditions for Ecuador’s $10.2 billion loan from the IMF have yet to be disclosed, the government is moving forward on efforts to increase tax collections. There is, however, one exception: the tax on money sent out of the country will be eliminated.

Deputy Finance Minister Santiago Caviedes

“One of the requirements the IMF makes of all countries receiving its funding is that tax income be maximized,” says Deputy Minister of Economy Santiago Caviedes. ”We will be closing loopholes in our system and looking to eliminate a number of exemptions we feel are no longer necessary. We have agreed with the IMF to increase collections by 1.4 points of GDP.”

Another component of the tax plan is to repatriate Ecuadorian money currently outside the country, which Caviedes estimates to be $36 billion. Under the 2017 Law of Repatriation, the government will begin an aggressive program, working with other governments and foreign banks, to identify offshore money and bring it home. “The information collection apparatus is much more sophisticated today than it was even a few years ago and we believe we will be successful in this effort. The law has been on the books for more than two years but it has lacked enforcement.”

Ecuador has agreed with the IMF that the five percent “exit tax” on funds sent out of the country is unfair and is an obstacle to attracting foreign investment. According to Caviedes, the tax will be reduced 25 percent a year until it is eliminated, beginning this year, and does not require approval by the National Assembly.

 

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