Tax reductions went into effect Wednesday for a variety of products and services, including cell phone plans, feminine hygiene products, diapers and a variety of medical devices and supplies. Taxes increased, however, for other products, including alcoholic beverages. The changes are included in the Economic Development and Fiscal Sustainability Law that went into after opposition in the National Assembly failed to reject it.
The biggest impact for the public, according to the government will be the cost reduction for cell service plans and hygiene and medical supplies. In addition to diapers and feminine products, the 12 percent VAT tax is eliminated for face masks, disinfectant gels, oximeters, glucometers, insulin pumps, pacemakers.
Most of the price reductions come as the result of elimination of the VAT but others, such as for cell plans, reflect elimination of the 10 percent special consumption tax, or ICE. “The ICE is essentially a tax on luxury items and services but since it was instituted such things as cell plans and other internet services have become mainstream and are no longer luxuries,” according to Presidential Secretary Fabián Pozo. “This will benefit the vast majority of Ecuadorians.”
Other products that will benefit from elimination of the ICE tax are gas calefones and electric and hybrid vehicles. Car and truck dealers say the change will boost sales of energy efficient vehicles.
A few products will see a tax increase as a result of the Economic Development law. The price of most alcoholic beverages will increase as the tax on alcohol content will rise to $10 per liter from the current $7.18. Artisanal producers are exempt from the increase.
Some businesses are complaining that they received only two days notice to implement the tax cuts, which did not allow time to adjust computerized pricing systems. “We were expecting this at the beginning of January so we weren’t prepared to update our accounting and pricing systems,” said Luis Naranjo of the Quito Chamber of Commerce. “We’re not complaining too much, however. Our customers will be happy.”