President Lenin Moreno has ordered a review of taxes he says are hurting Ecuador’s construction and real estate industries. During his weekly address to the nation on Monday, Moreno said that a 2016 law aimed at controlling land speculation was having unintended consequences, depressing construction employment and real estate sales.
Last week, National Assembly President José Serrano made similar comments about the Ley de Plusvalía, or capital gains law, announcing he had established an assembly committee to work with the construction industry to recommend revisions to the law.
“Construction is a sector of our economy that traditionally generates significant employment,” Moreno said. “In recent years, however, it has been the worst-performing sector and we need to make adjustments to reverse this.”
He cited Central Bank statistics showing that the number of building starts dropped 7.3 percent in the second quarter of 2017 from the same period in 2016, the seventh straight quarterly drop. “Our goal is to return to the level of construction and real estate sales we had five years ago,” Moreno said.
Ecuador’s Chamber of Construction says that construction activity is down almost 70% since 2012 and 2013. “The industry is in a depression and desperately needs tax and regulatory relief,” says Jorge Wilson, spokesman for the chamber. “Much of the decline has been the result of poor economic conditions but the Ley de Plusvalía, which imposes the highest capital gains tax rates in Latin America, is preventing a recovery.”
Moreno said that he supports the law’s intent to control land speculation. “Unfortunately, the law has a negative impact on ordinary citizens who simply want to own a home and that was not the original idea. People should not be penalized when they sell a home they have lived in.”