In on-going fight with National Assembly, Lasso vetoes tax law he says will stall economic growth

President Guillermo Lasso has vetoed reforms by the National Assembly to his economic development law he says will stall economic growth and social recovery. The changes approved by the Assembly would eliminate taxes adopted in response to the Covid-19 pandemic he claims are “critical” for funding the national budget.

President Guillermo Lasso vetoed the National Assembly’s revisions to his tax and economic development law.

“This is an irresponsible act on the part of the Assembly and one I will not allow to become law,” Lasso said Tuesday. “It is also unconstitutional since the same body approved an annual budget based on the revenues generated from taxes it now wants to eliminate.”

Based on constitutional terms of a presidential veto, the National Assembly must wait a year to reconsider the law and will need 92 votes for an override.

The veto set off a firestorm of protests from members of the Assembly while the business community and Lasso’s supporters applauded the action.

“Lasso’s tax law affects thousands of Ecuadorian families, artisans and entrepreneurs who are required to pay more taxes every month,’ says Yeseña Guamaní, Democratic Left assemblywoman. “The country is struggling to recover from the pandemic and an economic crisis and the tax burden should be reduced, not increased.”

The taxes that Guamaní and others want repealed apply to businesses and middle- and high-income wage earners. “The charges are applied unfairly to small, family businesses,” she says.

Juan Carlos Díaz, executive director of the Guayaquil Chamber of Commerce, disagrees and says the taxes that went into effect in 2021 should be maintained. “I have no objection if the Assembly revises bad aspects of the law or makes clarifications, but to throw out the taxes we need to meet budget demands makes no sense.”

Diaz admits it is unusual for the business community to support higher taxes but says Ecuador faces an emergency. “We are just beginning to rebuild after the pandemic and everyone agrees we must make major investment in law enforcement to fight organized crime,” he says. “We are in a crisis – many crises, in fact – and must fund measures to meet the challenges.”

Diaz disagrees with the claim made by center-left Assembly members that the taxes in question have the biggest impact on the poorest Ecuadorians. “That is incorrect. The taxes overwhelming affect companies and higher income people.”

In his statement following the veto, Lasso said the government would suffer an additional $1 to $2 billion deficit with the Assembly’s law. “We must continue to pay the salaries of our most critical workers, our doctors, teachers, police, military and social programs workers. We have massive challenges from organized crime and to restore the effectiveness of our health systems and the law that I am today rejecting makes no arrangements for funding critical needs.”