The president of Ecuador, Daniel Noboa, partially objected this Tuesday to the decision of the National Assembly to reject its proposal to increase the value added tax (VAT) from 12% to 15% and insisted on a reformulation of the text to increase the rate to that level.
Normally, when the National Assembly denies a bill it is considered that the process has concluded. The President of the Republic can veto laws when they have been approved.
But this afternoon, the president issued a “partial objection” to the rejection of the draft Organic Law to Confront the Internal Armed Conflict, the Social and Economic Crisis, a proposal that he had designed and that was based on the increase in VAT to 15%, with which he plans to raise an additional 1.3 billion dollars.
The partial veto was presented moments after the plenary session of the National Assembly approved the bill with modifications such as a special tax on bank profits and without including the increase in VAT as the Government sought to reduce the fiscal deficit and finance the “internal armed conflict” declared against organized crime gangs.
In his objection text, released this afternoon by the Presidency of the Republic, Noboa proposes that the VAT should be set at 13%, with the possibility that the president can circumstantially raise it to 15%, subject to a favorable opinion from the Ministry of Economy and Finance.
The “partial objection” issued by Noboa assured that he seeks to “improve the proposed text based on its objective application and full understanding.”
“In no case may the rate be less than 13% or greater than 15%, except for the exceptions provided for by law”added the Presidency in the text released this Tuesday.
He added that, “in order to guarantee the financial flow necessary to face the difficult national economic scenario, aggravated by insecurity,” it is established that “the VAT rate will be 5% on local transfers of construction materials.”
«Ecuadorians cannot wait one more day for the fight against terrorism to be strengthened with resources and continue to bear fruit. Guaranteeing the security of the entire country is a priority in the new Ecuador,” he concluded.
Noboa’s response was given shortly after the Assembly, by a large majority, rejected the Executive’s proposal that anchored in the increase in VAT a financing that seeks to close a fiscal gap inherited from the Government of President Guillermo Lasso (2021-2023) and that he in turn inherited from President Lenín Moreno, in addition to the “internal armed conflict” against crime.
The opposition closed ranks against the increase in VAT and proposed other forms of financing such as the application of a special tax to extraordinary profits obtained by private banks, among others.
The Legislative Assembly will have one month to agree to the partial objection of the Executive or ratify its decision, although this implies that it reaches a qualified majority vote in the plenary session; that is, 92 votes among the 137 legislators that make up the parliamentary forum. EFE
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