Moreno sends trimmed-down economic reform bill to the National Assembly

Nov 21, 2019 | 7 comments

Having failed in his first attempt, President Lenin Moreno hopes the revised, shortened version of the Economic Reform Law will be a winner with the National Assembly. The new legislation was submitted Wednesday night to the Assembly president’s office and will be available to the full Assembly on Thursday.

The National Assembly will consider a new version of the Economic Reform Law

The first version of the law, which contained 404 articles and 38 provisions, was voted down overwhelmingly Sunday night. Assembly members complained that it was too complex and included non-economic issues. Some members claimed it was unconstitutional due to its broad scope.

The revised bill contains most of the tax provisions of the first but has only 50 provisions. “We have taken into consideration Assembly’s objections to the original proposal,” Finance Minister Richard Martinez said. “Now, we have the opportunity to show the country that we can achieve consensus on a critically important issue. In the new version, we have eliminated some of the measures that had concerned citizens and productive sector.”

The new bill continues to apply new taxes, on a sliding scale, to companies doing more than one million of dollars annually and includes a new tax on digital platforms such as Uber, Netflix, Spotify and other services. It also contains a prohibition of tax deductions of families earning more than $100,000 a year, except for health care expenses.

As in the first draft, the advance income tax for businesses is eliminated and the VAT tax is maintained at 12 percent. Business interests had complained for years that the advance tax penalized day-to-day operations and was not based on income.

The new legislation eliminates several proposals, including ones that would have taxed artificially sweetened soft drinks and reduced the tax on cigarettes.

According to Martinez, the revised bill will result in $540 million in increased revenue and savings. The first version projected a difference of $730 million.

The new bill does not include the economic proposals submitted last month by the Confederation of Indigenous Nationalities of Ecuador (Conaie). Conaie insists that all new revenue be generated by taxing large businesses and high-income Ecuadorians, a position rejected by most business associations.

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