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Shoulder your civic responsibility as an expat and pay your taxes

According to Quora Digest, the southern hemisphere houses 12.2% of the world’s population. I was aware of this prior to moving to Ecuador; it was one of several determining factors​ that propelled my decision to move here​. When I arrived, I quickly learned that the city of Cuenca ideally suited my needs in several important ways. It has a strong cultural identity, is committing to sustainable development, and supports a thriving environment for the arts and education.

These are all elemental values for a robust and creative community to thrive and mature.  However, it is the embracing manner of the people that sets this place apart  —  these kind and accepting people opened their hearts and welcomed us to live among them, as neighbors and friends, for as long as our heart desires.

Our debt of gratitude needs to be more than a smile. It is time we return at least a small measure of the generosity granted us.

It is time for all expats, including those over 65, to start paying the IVA tax. This is the most basic way to take responsibility for our use of the many generous benefits we all receive.

I am truly flabbergasted that immigrants from countries known to champion democracy and exceptionalism would demand all they can get without the slightest inclination to pull at least a fraction of their own weight. Now, I’m not talking to the impoverished economic refugees — no one is faulting you bur taking your refund — but those who can afford to contribute their fair share by allowing the IVA to remain in the treasury.

We owe the good people of Ecuador much more than our presence. There is no reason for them to carry us on their backs.

The screeching of people demanding tax exemptions over quieter, more thoughtful consideration is a stain on civil, if not moral behavior. Ecuador is our home and needs our support to maintain the infrastructure we use every day, and to build the innovations that will improve our lives in the future.

So, what’s with the bellyaching?

To be a taxpayer is something to be proud of. It is evidence that one is a responsible, contributing, and upstanding member of society, a person worthy of respect in the community and representation in the government.

We must avoid the impulse of our North American neighbors who live only for today,  plundering for their own ease and convenience without regard to refurbishing or renewal. The societal consequences of their aversion to paying taxes have had devastating consequences across all segments of their society and have led to a diminished quality of life and the disintegration of essential infrastructures. Adding to the gluttonous shame is a much deeper condition that defies even the most basic understanding of humane stewardship; a growing number of public utilities are no longer capable of guaranteeing safe drinking water for their communities due to ignored maintenance and underfunded public works projects.

A properly funded government in which every resident lends a hand is essential for building the tools to the future —  and to attempt to mitigate the catastrophic damage done by those so consumed with their monetary fiefdom that they wield a wrecking ball to the environment.

“When a man pays a tax, he knows that the public necessity requires it, and therefore feels a pride in discharging his duty.” 

― Thomas Paine,

Voluntarily paying our IVA tax — and then not demanding a refund — is the principled thing to do. Not only does it help to provide for the many benefits we receive, it is investing in the future and for generations to come; it is what we must do if we do not want our new found home, so plump with opportunity and optimism, to become another impecunious banana republic

42 thoughts on “Shoulder your civic responsibility as an expat and pay your taxes

  1. For those over 65 the 12.2% tax is “voluntary” as far as filing for a refund or not

    What’s “breaking the law” is operating a business without paying income tax. All Ecuador businesses are required to register with the SRI and get a RUC number, yet few “expat” owned businesses do.

  2. I wholeheartedly agree with you. I also think all those expats running businesses under the table should start collecting and paying taxes as well!

  3. I for one am sick and tired of hearing about how expats should be grateful – i.e. :debt of gratitude”. Do some simple math….how many expats are there in Ecuador? Let’s be super conservative and say its only 20,000 (I know a silly number). And let’s say that they each spend $1500 a month (more then three times the basic salary) here. Now stay with me because I know this math is tricky….that’s $30,000,000 per month in NEW (not local money being recycled but money brought into the country) dollars, or $360,000,000 per year being pumped into a broken economy. I think whatever “debt of gratitude” might be imagined, is more than repaid – many times over.

    Second, until this government gets its act together and stops squandering money, I fell no obligation to pay even $0.10 in taxes that I do not have to. When they get rid of another 20% of useless government employees, close some of the countless ministarios that do absolutely nothing (WTF does the Ministario of Inclusion contribute to this country for example), then it might be appropriate to revisit this issue.

    1. That post is going to get you in trouble with the ones that say we have no impact on rising COL in Cuenca or the widening GINI coefficient.

    2. Which government employees are useless? Please be specific.

      Keep in mind, of the roughly 400k government employees, 93% of them are teachers, healthcare workers, police and military. Given that all those areas are woefully understaffed, I’m interested in where you think any significant cuts can be made.

      1. You’ve answered your own question. What does Ecuador even need a military for?

        Drive to Quito from Cuenca and you will encounter at least two, often three traffic check points. If you have that may cops with that much time on their hands, you have too many.

        At least twenty percent of employees in the various ministries like migracion, ant, inclusion just to name a few could be let go and you would never know the difference.

        The problem is that as the government cuts government jobs per mandate of the IMF it will cut the jobs you describe – health care, etc. because the truly useless jobs are held by political appointees. Ecuador has essentially created an industry of government employees, which caters to political obligations and is fueled by borrowed money. Not indefinitely sustainable.

        1. I suppose one can ask why any country needs a military. The US hasn’t been invaded since 1812 but they have the most powerful military on the planet. However, in Ecuador’s case it’s a little closer to home. You do realize that Peru invaded Ecuador as recently as 1995, right? It was only through superior warfighting that the smaller Ecuadorian military was able to push them out and maintain their territory. When Peru invaded in 1941, Ecuador lost a third of its territory. They tried again in 1981 but that led to a stalemate. It was only after getting their rears handed to them in the Cenepa War of 1991 that Peru stopped trying to chip away at Ecuador’s territory. That’s not to say they won’t try again in the future. The people in Loja live under the specter of being invaded by Peru every day.

          But the military is only a small fraction of government workers. They constitute fewer than 25k of the 400k people on the government’s payroll. They mostly deal with drug interdiction and guerrillas in the jungle, a task that at least a couple Ecuadorian soldiers lose their lives for every year. The tiny Ecuadorian Navy plays a vital role in protecting the territorial waters from illegal fishing fleets from Asia, something those of us here in the Galapagos are all too familiar with. In between those missions, they provide the majority of the manpower for natural disasters and they participate in UN peacekeeping missions, 7 in this century alone. I had the honor of working besides thousands of Ecuadorian service men and women in the response to the 2016 earthquake. They hustled day and night through aftershocks rescuing people buried in the rubble so that mostly useless physicians like me could stabilize and evacuate victims to the nearest medical center 5 hours away.

          Eliminating the entire military would not have any noticeable effect on the budget or your tax bill. Civilized countries require civil services. That’s police, healthcare, education and all the sundry services you need to run a country efficiently (air traffic controllers, civil registry, notaries, courts, etc.). In other words, far from “useless”.

          Slogans like “at least 20% of government workers” sounds easy until you have to sit down and actually decide where to make cuts in the real world. 20% is 100k people. What are you basing that number on? Have you done any studies to determine what needs to be done and how many it takes to actually do it? Based on your 20% number, you could cut every worker who isn’t in healthcare, education, police or military and you’d still have to cut tens of thousands of them as well. That’s every firefighter, every road worker, everyone in every government office, and you’d still have to cut a huge proportion of doctors, nurses, teachers, police officers … every service that a nation requires to be a nation. Your 20% number is utter bollocks based on nothing but your imagination.

          The reality is that Ecuador has one of the lowest tax burdens in the Americas and a very spartan civil service corps. The education and healthcare staff numbers are barely half what you’d find in any developed nation. If you want to solve the budget deficit, start with having the rich pay their taxes instead of hiding it in Panamanian bank accounts. If you want to know where to begin, you can look into Balboa Bank account number 100-4-1071378. That’s Moreno’s offshore account that the AG has refused to look into.

  4. So many helpful people in the expat community to tell me how to spend my money, I give you a sarcastic “thanks”. The author has put in an effort to tell me what my “fair share” is and is not. Another sarcastic “thanks”. How did I ever manage to live into my sixties without such help? Notice this article does not contain suggestions but rather dictates. If these little tryants (in their minds) were in power you would be forced to do what ever they dream up.

    1. Just a year ago I was reading something “someone” wrote here about joining IESS and paying about $70 a month. Even though, “that person” holds a pensioners visa so has at minimum, an income of $800 a month. And should be reporting 17.6% of that but obviously isn’t. Or does paying your fair share only apply to taxes.

      1. Actually, the new IESS requirement was deemed unconstitutional as it was applied only to expats living in Cuenca. The new requirement didn’t include anyone else living in Ecuador. Many people never knew of the new law and didn’t change their contribution and were never denied access to IESS.

  5. Thanks, Robert. I agree with you but also with the guy who says that not many old gringos take advantage of the IVA refund option. I did an informal poll a few months ago and only 2 out the 10 of those I talked to received a refund.

  6. Well, Robert, it looks like you’ve put the bowels of the ugly Americans into an uproar. It’s not hard to do.

    1. I haven’t heard “don’t get your bowels in an uproar” since my dad used it years ago to shut down political arguments at our dinner table back in Indiana. I agree, Rayban, that it describes the outbursts of some of the commenters on this site and other expat sites. Personally, I have mixed feelings about Robert’s argument but it could certainly be countered with a rational, non-nasty response. I learned a long time ago not to be downwind of the Ugly American stinkers when they get fired up.

  7. Robert. I’m enchanted by your photo of the fox with the US flag motif bundle. Is it a framed painting or a wall “graffiti” found in Cuenca? Your photos are generally great. Keep recording your world.

  8. I have to agree. I’ve never claimed the IVA refund, though the red tape alone was enough of a disincentive. And while we’re at it, I’ve never joined the parsimonious gringos who demand a 50% rate on their 35-cent bus fare, and won’t use the “tercera edad” line at the bank, so long as I’m reasonably ambulatory.

    1. agree, but when I got my bus card I had no choice on the discount, they plug your age in and you get it like it or not. I would gladly pass it up.

  9. I decided way back in the beginning that we pensioners are allowed to live here for two reasons: (1) We don’t put many demands on the system or compete with working-age people, and (2) We emit money. That’s our job.

    I had no choice but to pay taxes in the U.S., and did. And even though I’m still relatively low on the income spectrum here, as measured relative to an average expat couple, I never even think about taxes here.

    I also hand out money on the street to anyone who needs it. The machine at the bank gives me as many dollar coins as I want, and if a few find other homes every week, I’m happy to let them go. There are many people here who need them far more than I do.

    My shorts have no knots in them.

    1. healthy people don’t put put too much strain on the system but elderly sick people do. Health costs are enormous as anyone from the US would know. It is cheaper to be sick here than in the US but still a huge drain and probably not covered by $80 (?) a month for an elderly couple.

  10. I think the tone was a bit harsh, but the substance of the article was good. For ease of compliance, it’s likely easer to differentiate tax payors as either “citizens” or “noncitizens”. For noncitizens, including permanent residents of course, Ecuador could simply reduce the caps over time to extinguish this benefit. The incidence of this tax benefit is relatively small, on balance, when compared to the inequity that exists in the area of health care benefits.

    As some point out, those who value the tax refund benefit most are likely to put the refunded money back into circulation quickly. But the health care issue, where monies, if any, may be distributed to those moving to Ecuador, at the expense of citizen’s who have paid in over a working lifetime, seem egregious and simply unfair. Given Ecuador’s budget difficulties and international oversight, I’d have to think resizing this unfunded health care liability will be important. Having said all of this, Ecudaor obviously values legal immigration, in terms of the cultural and economic contributions, etc.

    Ecuador faces difficulties ahead, for sure, so all options must be on the table, including eliminating or reducing economic benefits to noncitizens. I think Ecuador would estimate such reductions as a net long term loss, despite the short term gains, but the government may get pushed to act.

  11. Some expats take the IVA refund, pay the Ecuatoriana who prepares the claim, then donate the refund to Hogar de Esperanza, CETAP-Lucy, or other charities, thinking the money will be better used than if it’s left with the government. Some of us also pay our fair share to IESS, based on our actual income, since we haven’t been paying into it for decades–although it’s evidently easy to arrange to pay only $70 a month or so. Some of us also pay IESS for our cleaning woman and other employees, although it’s easy to dodge that as well. There are numerous ways to “shoulder [our] civic responsibility,” including volunteering.

  12. “We must avoid the impulse of our North American neighbors who live
    only for today, plundering for their own ease and convenience without regard to
    refurbishing or renewal”

    Who are you referring to RJB ? Are you suggesting all NA neighbors live this
    way, sure sounds like it. If not you
    could have left “North American” out.

    “Adding to the gluttonous shame is a much deeper condition that defies
    even the most basic understanding of humane stewardship; a growing number of
    public utilities are no longer capable of guaranteeing safe drinking water for
    their communities due to ignored maintenance and underfunded public works
    projects”

    Another knock on the US, is the author suggesting there are no such issues
    in Ecuador, maybe not Cuenca, but in many communities there are indeed issues
    with water quality, and Cuenca certainly has issues with pipes and so on.

    “Now, I’m not talking to the impoverished economic refugees — no one is
    faulting you for taking your refund”

    Are you referring to the folks who never bothered to save for retirement yet
    probably spent money on frivolous things during their working years, eating out
    twice a week, and all that ? btw I
    corrected your typo.

    “When a man pays a tax, he knows that the public
    necessity requires it, and therefore feels a pride in discharging his
    duty.”

    ― Thomas Paine,

    True, but paying you legal obligation is all that is necessary to adhere to
    this statement. Given the performance of
    most governments, why pay more ?

    All that said, I will not likely ask for an IVA refund (due to the hassle) but if I do it will go to one of the local
    charities in Cuenca. I would prefer the government
    not manage any money due to me wherever I live as I am certain I can do a
    better job, including in Ecuador.

  13. Another well intentioned but misinformed limousine liberal trying to assume the moral high ground by telling the great unwashed how to spend their money. While I agree with the premise upon which this missive is built I couldn’t disagree more with his solution. If you feel the best way to give back to the community is to feed the pig (AKA the government) and let them pad their pockets and the pockets of their associates feel free to do so. Your suggestion to do just that demonstrates a profound ignorance, but an admirable faith, in bureaucrats. If you truly want to give back to the community you should claim the refund and give directly to those causes in which you purport to believe. I, for one, believe I can allocate my money much better than the government. A few suggestions; buy food for a struggling family. Fund a students education. ????? The last place I want my money to go is into the hands politicians.

    1. Ecuador already funds every student’s education all the way through grad school. They are able to do that when people pay their taxes.

      1. that is not quite true, I helped pay my Cuencano son in law’s college bill for the past several years. Possibly because he went to Salesian Polytech rather than U of Cuenca (private vs public) That said his education was relatively inexpensive and he just graduated a month ago HUUURAAA

        1. Congrats to him and kudos to you. That’s probably the best thing one person can do for another.

          1. thank you I agree, education is key, he got his degree in vet medicine, large animal specialty (cows, etc) thanks again, been a long haul

            1. Uff, beautiful profession. My uncle was the first doctor in our family. He was a large animal vet. When I started med school, he told me to go into radiology. I should have taken that advice. Could have retired years ago.

              Funny thing about medical school. A plurality of my classmates were students who couldn’t get into vet school. There were four in my class, but apparently it’s a very common phenomenon worldwide. There are a lot fewer vet schools so getting in is a lot harder. I ran into some vets from California on Genovesa Island a few months ago. They were doing some field research on blue footed boobies. They were living in tents on that uninhabited island so they were grateful for the hot shower and cocktails. I mentioned my classmates who studied human medicine because they couldn’t get into vet school and one told me about of his classmates who dropped out and went on to become a cardiologist. It’s a lot easier to keep up with only one species.

              The longer I practice medicine, the more I wish I was a vet. Should have gone into pediatrics. It’s pretty much the same thing.

              1. One of my best friends growing up wanted to be a vet that is all he talked about since we were about 12 (well bird hunting too). He went to University of Delaware with a near 4.0 in science courses, and still could not get into vet school. I have not seen him in forever but understand he has done well (he did not choose medicine). As for Miguel and vet school in Cuenca not sure if its quite as hard to get in, but it was a fricking ton of work to get out LOL.

                as for boobies well I have nothing to add.

                as for your profession, hindsight is 20-20, sounds like you are doing fine enjoy

  14. Those who think of IVA refunds or discounts for expats as “unfair or unwarranted breaks” or “drains on the country’s income” display complete ignorance of the reason that those breaks exist. And you speak as if you think such events are unique to Ecuador.

    They are put in place by government administrations the world over as *incentives* to attract expats – especially senior expats since they control so much wealth – because they *contribute hundreds of millions of dollars a year (as illustrated by George’s math below) to the government coffers that wouldn’t occur otherwise*.

    In short, Ecuador *needs* us expats, and obviously thinks refunding to us, say, $35 a month in IVA tax to help attract us here in the first place and to help keep us here, is smart business. So would every business in the world that uses *incentives* to achieve their many varied objectives. It is a business strategy as old as the human race.

    1. there are not that many countries in the world that want older people to move there. Ecuador has one of the easiest retirement visa programs in the world. Good luck trying to move to the US, England or Australia as an older person .. specially if there are health issues involved.The IVA refund was not set up to attract expats .. it was to make life easier for the older Ecuadorians who have worked and paid IVA all their life. It is available to expats too of course. Ecuadorians have been paying taxes all their lives to provide government services. Expats pay no tax on pensions or income received from overseas and can get back the IVA as well. All that is being contributed is spending the $1500 a month … which many Ecuadorians are spending too but have also paid taxes on their income. The cost of supporting sick elderly people is huge and would possibly be higher than any advantage of someone spending $1500 into the economy. It is your right tho to claim or not claim … or claim and give the money to your favourite charity.

      1. Agreed.

        It is less likely that the IVA refunds were to attract expats than it is that it is an oversight in the new constitution.

  15. My spouse and I moved to Ecuador 15 years ago with the intention of giving back to Ecuador. We started a business to employ Ecuadorians and brought millions of dollars into this country. We gave the profit to Ecuadorians and only kept enough to cover operating expenses. We don’t collect the IVA refund, and this is recorded on the government’s website. We discovered this when our accountant found that we could collect thousands in refunds from said website. She was shocked and grateful when we told her we believe that money should be used for Ecuadorians. If ever the SHTF, it will be clear we have never taken a penny from Ecuador. FYI, our business was legal and it paid taxes not only to Ecuador but the U.S. as well. We also got Ecuadorian citizenship to further enforce our commitment to this country. So don’t try to paint us all with the same brush.

  16. I donate my IVA refund directly to Hogar de Esperanza which I consider to be one of the best Ecuadorian charities serving the local and immigrant populations. Just register with the charity of your choice and give them your receipts, then all of the paper work is done by them.

  17. Really?

    With all the billions of $ that flow to Ecuador from Ecuadorians in the US, and many other countries, and all the state and federal benefits those same people generous receive from the US taxpayer you wrote ba whole article begrudging of few bucks of IVA from a few US retirees on fixed income.

  18. More gringo bashing . . . from another gringo. Very offensive article. BTW, we are adults and should be able to comport ourselves accordingly without being guilted into doing so.

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