The plenary session of the National Assembly of Ecuador rejected this Tuesday the proposal presented by the president Daniel Noboa to raise the VAT (value added tax) from 12% to 15% with the aim of reducing the State’s fiscal deficit and financing the “internal armed conflict” that it declared against organized crime.
In a session where 135 of the 137 parliamentarians that make up the Ecuadorian chamber were present, Noboa’s initiative had 83 votes against, 43 in favor and 9 abstentions.
The proposal proposed raising the VAT by one percentage point permanently and two temporarily until 2026, as part of the so-called ‘Law to Confront the Internal Armed Conflict, the Social and Economic Crisis’classified as a project to be processed urgently.
On the other hand, other motions were approved, such as imposing a special tax of between 5% and 25% of the profits generated by banks and cooperatives during the fiscal year 2023, a measure that had the unfavorable opinion of the Central Bank because it considered that it remained liquidity to the financial system.
The day before, the governing entity of Ecuador’s monetary policy issued a statement in favor of increasing VAT and focusing fuel subsidies to balance the fiscal balance, after having lost practically half of the international reserves in the last two years. that there were in March 2022, greater than 9.2 billion dollars.
With the increase of three percentage points in VAT, Noboa hoped to increase the country’s tax collection by about 1.3 billion dollars without affecting basic basket products, which would not be affected by this measure.
Likewise, motions to raise the foreign exchange outflow tax (ISD) to 6% and to impose a special rate of 5% on construction materials were also passed.
The plenary session of the National Assembly took place with protesters both in favor of and against raising the VAT stationed in the vicinity of the legislative palace.
With these votes, the legislative initiative was no longer archived as some assembly members demanded and will now pass again into the hands of Noboa, who will have the possibility of vetoing the text completely or partially.
If you object to this text, the Assembly will have another 30 days to evaluate whether to accept the changes or ratify its provisions before it comes into force.
This is the first setback that Noboa suffers in his mandate, who until now had been able to carry out other proposals with agreements with the forces with the most representation in the chamber, such as the Citizen revolutionled by the former president Rafael Correa (2007-2017) and the conservative Christian Social Party (PSC).
The president hoped to achieve support for this measure within the context of the internal “war” that he has declared against organized crime after the wave of violence and attacks experienced at the beginning of the month, in a spiral that included the takeover of a television channel. by an armed group and riots in prisons with some 200 hostages who managed to be released.
With that statement he went on to consider criminal gangs, dedicated mainly to drug trafficking, as terrorist groups, and emphasized the need to obtain more economic resources to confront this internal threat, in the midst of a growing deficit that last year bordered on 5.8 billion dollars, equivalent to 5% of the gross domestic product (GDP). EFE (I)
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