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Moreno’s tax reform proposals go to the Assembly without an IVA hike

The government hopes to generate almost $600 million in new revenue from a series of new taxes and adjustments to current taxes. The package of proposals, which does not include an increase to Ecuador’s 12 percent IVA tax, was submitted to the National Assembly on Saturday.

Ecuador Finance Minister Richard Martinez

Among the proposals is an income tax surcharge for large companies and the elimination of exemptions for families earning more than $100,000 a year.

In television interviews over the weekend, Finance Minister Richard Martinez said that many of the proposals are recommendations from the International Monetary Fund (IMF), which is coordinating a $9.5 billion loan package to Ecuador. “We have listened to their recommendations and have taken their advice in many cases,” he said.

Martinez says that the government still hopes for savings by reducing fuel subsidies that were rescinded by President Lenin Moreno in an October 13 agreement with indigenous leaders. “We have not given up on this and are working with Conaie [Confederation of Indigenous Nationalities] to develop a new plan to reduce some of the subsidies,” he said.

He added: “Above all, it is very important that citizens understand there will be no increase in the IVA tax. There has been misinformation in the media about this suggesting we would raise the rate and this is not true.” The IMF proposed a three percent IVA increase, citing the fact that Ecuador has one of the lowest rates in Latin America.

In addition to proposals to increase revenue, the economic reforms include concessions to business that Martinez says will generate more tax revenue in the future. Among them are the elimination of the advance business income tax, which required companies to pay tax on estimated income, reduction in paperwork and taxes for small businesses, and a partial elimination of the tax on funds sent out of the country.

“One of our chief aims is to make it easier for little businesses to operate in the country,” Martinez said. “We are a nation of small family businesses and recognize that some old laws and requirements are too burdensome.”

The new income tax on large companies would cost companies between .10 percent and .20 percent depending on total revenue.

135 thoughts on “Moreno’s tax reform proposals go to the Assembly without an IVA hike

  1. “The IMF proposed a 3-cent IVA increase, citing the fact that Ecuador has one of the lowest rates in Latin America”

    Once again, it’s irrelevant what other “Latin American” countries do.

    1. If Ecuador is serous about balancing its books it needs to raise its ridiculously low taxes. Not only is the VAT too low, so are income and property taxes. There are only two countries in the western hemisphere with lower overall taxes.

      1. Ah, the philosophical question of taxes! Take money from the people and give it to the Government. If we do this we have to admit that the government knows how to spend money much better than the people do and we all know that that is not true — whether it be Ecuador or Canada.

      2. Ron, you seem to be confusing government with a supermarket, just because you pay more doesn’t mean you get better service or quality increases, there is just more that can be stolen through waste, mismanagement and/or corruption. As the third (and greatest) president of the US said, “The government that governs best governs least. “

    2. What is more important is that there is no such thing as a “3-cent IVA increase”, nor is there any such thing as a 3% IVA increase. Properly, it should have read “a 3 percentage point increase”. The difference between “3%” and “3 percentage points” is enormous.

        1. Straw man argument. She never said that hard work necessarily makes one rich. You’re better than that. Please stop taking cheap short cuts.

            1. No, Jason, that would be you. Deflecting my valid criticism with a cavalier dismissal is just that———– deflection.

              1. Like “straw man”, you keep using terminology you don’t understand. Another demonstration of why Google is no substitute for a proper education.

                But please, let’s get this conversation back on track. Please explain to us why Esmeralda wasn’t stating that if you work hard you will become rich.

                1. Why do you suppose to know a thing about my education? I know about yours because it has been posted elsewhere and I assure you, both my formal education and my life experiences dwarf your own by any measure. Want to talk about that inferior Med School you went to in Mexico?

                  1. I don’t need to know about your level of education. I can simply counter your statements with actual facts. I can’t imagine being so desperate to score points online that I would resort to cyberstalking, but apparently you need it more than I do.

                    Tell me more about my life experiences and how they are dwarfed by yours. Clearly you’ve spent hours stalking me online looking for anything you can find about me to deflect from your fallacious arguments.

                    1. More deflection. Things aren’t so just because Jason Faulkner says they are and I am very confident that any careful reader can and does see right through you.

    1. Any economist that’s not lying will tell you a “sales tax” is a “regressive” tax.

    2. If the down-votes would be identified there would not be so many of them. It’s not fair of CHL to publish only the up-votes. Some people are simply down-voting everything without reading the comment.

      1. You are right about this, but there are some of us that have the integrity to evaluate what others post based on content, not just on who posted it. Hell, I even give you up-votes when you write something that merits my approval. Sadly, that is seldom.

          1. You are naughty. Wait until Ken finds out that you are sullying his reputation. I heard he is 8 feet tall, weighs 380 pounds and is quick as a cat.

  2. Simple math. Approximately 16 Billion people and $9 Billion. Each person has to contribute in round numbers $300 per year for three years OR the economy must grow at an astronomical rate over the next three year if the repayment is to happen. You cannot sell off all your natural resources. That does not work. Success will only happen through transparency by all the parties and by bring businesses and government into the 21st century. In my two years that I have been here I see a major flaw in regards to the teaching of so called capitalism and business growth. You can’t go into business with very little capital. Most service businesses do not succeed because they are under capitalized. You also cannot be successful if you have to pay a financial institution 15%+ interest on a business loan. It usually take three or four dollars of sales revenue to generate one dollar of profit. In my mind it is always better to generate profit than to save on expenditures. Revenue will circulate many times over. Yes, you can cut waste and duplication of services but it can be counter productive. We all know that job creation and good paying jobs require education. That’s where the loan money needs to be spent in my opinion. In Cuenca from what I am told, the mayor is a successful businessman. Just maybe he and his team need to teach other businesses or people who want to be in business how to be successful. That’s my two cents from a happy expat who enjoyed 40+ years in my own business and now totally enjoys my life in Cuenca and Ecuador.

            1. More projection and deflection. You are the one that seems desperate to participate in every article posted on this site.

    1. What do you mean you need can’t go into business with very little capital, one wheelbarrow and something the market wants at a fair price and you’re in business.

    2. Your post shows to me the problem with those who pontificate about business or evem more so government. In medicine and technology, improvements are measurable as the scientific method is used. Part of the issue is answering questions about business is measuring results but the biggest failure is just poor thinking. Saying you need X capital is like a doctor saying, medicine is good. What the doctor says, medicine A is good for disease B. Who here would walk into a person’s office and be comfortable with that person saying I have been doing this Dr stuff for 40 years the Dr is judged to be competent based on adhering to scientific testing, peer review and not to pure boasting. That is why one should discard most business advice and all political advice. It is often BS and just barking loudest. Nothing that actually has been tested scientifically.

  3. I am still wondering why did Lenin Moreno forgive these unpaid taxes? It’s not like these companies could not afford to pay them.

    “On the day that the Law entered into force the private sector owed the government US$4,291,200,00 (almost $4.3 billion)—for unpaid income tax alone—not counting interest. This figure is higher than the total credit granted by the IMF. The IMF loan is for $4.2 billion and will be paid in installments if the country is deemed to be complying with the IMF conditions.

    The list of big winners from the new policy is topped by fossil fuel corporations: Andes Petróleum Ecuador LTD , which owed US$396.2 million, of which US$228.3 million would be forgiven; Oleoducto de Crudos Pesados, OCP, which owed US$347.7 million and would be forgiven US$194.4 million; Consorcio Petrolero Bloque 16, which owed US$141.6 million and would be forgiven US$78.7 million; AGIP OIL Ecuador, which owed US$96.1 million and would be forgiven US$61.5 million; Repsol Ecuador S.A. which owed US$93.7 million and would be forgiven US$52.2 million, just to name a few. A second tier of winners includes the offshore phone company OTECEL S.A., which owed US$78.4 million and was forgiven US$38.9 million; Exportadora Bananera Noboa S.A., that owed US$71.1 million and will be forgiven US$41.2 million. There are several private banks, including: Banco Pichincha that owed US$39.6 million and will be forgiven US$18.3 million; Banco de la Producción S.A. Produbanco, which owed US$29.3 million and will be forgiven US$14.9 million; Banco de Guayaquil which owed US$6.3 million and will be forgiven US$3.9 million. It bears mention that this list of beneficiaries only includes income tax debt. ODEBRECHT is also on the list, owing US$11.8 million of which US$4.5 million will be forgiven. And Mr. Alex Bravo, former manager of Petroecuador, who is known to still have accounts in offshore tax havens even though he is in prison, owes US$6.3 million and would be forgiven US$3.9 million. [1]We should also remember the acts of corruption associated with Odebrecht operations, for which Ecuadoran beneficiaries and accomplices have yet to stand trial. This stands in stark contrast with how this was handled in other countries, such as Peru.”

    1. Good lord, all these simple arithmetic errors, combined with not understanding standard notation in Latin countries leads you into many false conclusions:

      The figure, as you have written it —–US$4,291,200,00 ——–is not almost 4.3 billion dollars and you too, are off by 3 orders of magnitude. the last two zeroes, preceded by a coma indicate cents, thus what you are really talking about is $4,291,200 and that is ~ 4.3 MILLION dollars, not billion dollars.

      1. The typo was the first figure, not the two-dozen or so figures that followed it. The total amount forgiven was indeed $4.3 billion (some sources say
        $4.2, the government has been terribly inconsistent in the data it
        submits to the various entities). Tellingly, it was almost the same amount requested from the IMF almost a month after those taxes were forgiven.

        1. My reply was based entirely on the comment I was responding to, and I stand by that reply. Your comments are valid and well noted as is the underlying notion that the tax forgiveness that you allude to is crazy. How is Moreno rationalizing this?

          1. It was over a year ago. The “rationalization” was that it would free up industry to create more jobs, as if companies create jobs just because they have excess capital and not because consumer demand outstrips their production capabilities. The end result was 700k more Ecuadorians unemployed than before this massive windfall to the most profitable companies in the country. It’s the same old neoliberal trickle down delusion that has never resulted in the promised outcome but for some reason still has believers. Faith-based economics.

            1. You go from “as if companies create jobs just because they have excess capital and not because consumer demand outstrips their production capabilities” to “The end result was 700k more Ecuadorians unemployed than before this massive windfall to the most profitable companies in the country.” as if there was some sort of cause and effect relationship between the former and the latter, without a shred of proof.

              1. Let me explain it slower for you.
                Moreno pardoned $4.2 billion in unpaid taxes, justifying it by claiming that it would create jobs.
                One year later, 700k more people are unemployed than before the windfall.
                I never said there was a cause and effect. In fact, I’m clearly pointing out that there is NO cause and effect, as in tax breaks don’t create jobs.
                Am I going to fast for you, Charlie?

                1. Your sanctimonious condescension doesn’t help you make your points and all you are reduced to is arm waving and gas lighting. Do you really think people don’t see through you?

                  I invite others to simply re-read what we have both written and they can determine for themselves who is full of crap.

                    1. Notice how EVERY conversation you have with ANYONE on ANY subject always ends up on some meaningless tangent? Yet you accuse me of deflecting. Fish or cut bait, Ken. You aren’t fooling anyone with this silliness. Do you have anything to contribute to this line of conversation or is this just another example of your OCD compelling you to get the last word no matter how meaningless?

                    2. I can truncate this conversation for you and other interested parties; The antecedents of your terms, “EVERY”, “ANYONE” and “ANY”, is pure bullshit. pure trumpian hyperbole and not worthy of further comment.

        2. If your numbers are true, maybe that’s where the 18 mil in the panamanian bank account came from.

          1. We already know where the money in the Panamanian bank account came from. The dates and amounts of deposits were published over a year ago. The payments came from Sinohydro for “consulting fees”. Sinohydro is the company that built the Coca Codo Sinclair hydroelectric plant.

        3. I suggest everyone “forgive” themselves of all taxes, starting today.
          Then “forget” about paying them in the future.

          1. Good luck with that. We’ll send you smokes in prison so that you have something to barter with.

      2. Good Lord, check your math again Ken! “Andes Petróleum Ecuador LTD , which owed US$396.2 million, of which US$228.3 million would be forgiven;……” Obviously if $228.3 million would be forgiven, and this is only ONE company, how could the total forgiven amount be only $4 million-something? I know standard notation in Latin countries very well, it is the same as in the country I am from. But it was obvious to me that when they wrote US$4,291,200,00 they made a mistake. It should have been written as $4,291,200,000.00 The amount forgiven by Lenin Moreno IS almost 4.3 billion US dollars. My question is still the same, WHY did he forgive such an amount? Why not collect it instead of asking the IMF for almost the same amount in loan?

        1. It has ZERO to do with my arithmetic, it has everything to do with what you wrote, which as I have accurately said, was only ~4.3 million. If you are unclear about how numbers are written in Latin countries (with comas where gringos might put decimal points) then perhaps you should review that system.

          1. It was clearly a typo. Once again you and Charlie were the only ones who didn’t get it. Stop digging already. You’re making everyone sad.

            1. Right is right even if nobody recognizes it. Wrong is wrong even if everybody recognizes it and accepts it.

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