Under growing budgetary pressure, Ecuador’s National Assembly is proposing a 100% tax on the purchase of gas-burning appliances, including stoves and hot water heaters. The tax is part of legislation intended to produce $200 million in income for the government.
The legislation, according to its sponsors, is needed to help offset losses due to the plunge in oil prices. Oil prices are hovering near $50 a barrel while Ecuador’s budget is based on a price of $80.
The Special Consumption Tax, or ICE, will also boost the government’s efforts to convince Ecuadorians to switch to electric range tops and ovens, an effort that has so far has fallen far short of government expectations. The legislation provides further incentive to switch to electric by eliminating the 12% VAT tax on convection cook tops.
Other provisions of the legislation, called the Tax Fraud Prevention and Production Incentive act, will eliminate tax deductions for what the government considers unhealthy products, including junk food, raises taxes on some products, such as cigarettes, and limits senior citizen VAT tax refunds.
The legislation also includes tax cuts for some businesses to encourage more production and job creation, sponsors say.
Assemblyman Virgilio Hernández, a member of the ruling Alianza País party, says that one of the intents of the legislation is to prevent tax evasion, particularly among high income families.
“Those with higher incomes are not contributing their fair share and this bill increases the government’s ability to collect that share,” Hernández said.
The Assembly plans to send the legislation to President Rafael Correa for final approval.