Lasso eliminates currency exit tax for airlines; Local bus owners threaten stoppage; Import tariffs drop tomorrow; Peruvian earthquake rattles Cuenca

Jul 31, 2021 | 6 comments

President Guillermo Lasso announced Friday that the currency exit tax (ISD) will be eliminated for airline ticket income. He said the move would provide a boost to the airline industry and help revitalize Ecuador’s tourism industry that has been hard-hit by the Covid-19 pandemic. “By allowing airlines to transfer their earning out of the country without penalty, we will provide an incentive for them to reduce ticket prices and increase flights,” he said.

The airline industry welcomed the government’s decision to end the foreign exit tax on ticket sales.

Marco Subía, Ecuador Airlines Association president, said that elimination of the tax will allow the country to join the Open Skies agreement with other countries, especially the United States. “It will open other doors that have been previously closed and allow new airlines to enter the local market,” he said. “It should also mean lower ticket prices.” He added that prior to the pandemic, the airlines spent about $14 annually on the tax, most of which was passed on to passengers.

Peter Cerdá, Regional Vice President for the International Air Transport Association, also welcomed the announcement but said he is also pushing for the elimination of Ecuador’s $20 Eco tax on ticket prices. The tax funds the Ministry of Tourism’s international advertising program. “Eliminating the exit tax and the Eco tax could create 70,000 jobs in Ecuador’s tourism sector and lead to a $990 million boost to the national economy,” he said. “Currently, Ecuador is an expensive country to operate in so these measures will go a long way to putting the airline industry here on a competitive footing with other Latin American markets.”

Lasso said he looks forward to eliminating the ISD on all financial transfers out of the country but said the move would be gradual since the country makes about $700 million annually from the tax. “Ultimately, doing away with the tax will bring in much more money than we lose since it will generate more trade and investment.”

Municipal bus owners threaten to end service
Cuenca municipal bus service will end in the “coming days” according to the Chamber of Transportation. In a two-page letter to Mayor Pedro Palacios, the Chamber, which represents bus owners, said its members are operating at a loss due to reduced ridership and high fuel costs. The Chamber said that Covid-19 social distancing requirements as well as the loss of employment by some of its passengers have severely reduced income from fares while the elimination of the subsidy for diesel fuel has increased operating expenses.

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In June, the Chamber told the city it needed a fare of 45 cents, a 15-cent increase above the current ticket price, to continue operations. Although several meetings were held between the Chamber and the city transportation office, none have been held in recent weeks.

Peruvian earthquake felt in Cuenca
A strong 6.1 magnitude earthquake in northern Peru was felt throughout southern Ecuador, including Cuenca, early Friday afternoon. The quake, centered near Piura, Peru, occurred at a depth of 36 kilometers at 12:10 p.m. Forty-six people were reported injured and property damage was reported in Piura and nearby towns.

Ecuador’s Geophysical Institute said the earthquake was felt “with moderate strength” in Loja, Machala and Guayaquil and “with mild strength” in Cuenca. Police and other authorities responded to numerous phone calls in Loja and Guayaquil and said some structures showed minor cracking.

Tariff drop tomorrow on 667 imports
Import tariffs on 667 products, many of them consumer goods, are set to drop on Sunday. Among the products that will become cheaper are bicycles, cameras, cosmetics and computer accessories. Tariffs for many products will be eliminated entirely while those on others will drop from 25 percent to five percent. Ecuador’s Foreign Trade Committee (Comex) ordered the reductions in June.

Among those applauding the reductions is Ecuador Olympic gold medalist Richard Carapaz who says the 15 to 25 percent drop in the purchase price will mean that thousands of Ecuadorians will now be able to afford high-quality bicycles.

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