Ecuador President Pushes Lawmakers to Revote on VAT Hike
Lawmakers Reject VAT Hike, Approve Tax on Banks’ Profits
Ecuadorean President Daniel Noboa has taken action to force lawmakers to reconsider a measure to increase the value-added tax in order to fund a security offensive against criminal groups. The move comes after legislators initially voted against the proposal earlier in the day.
The measure to raise the VAT from 12% to 15% until 2026, and then to set it at 13% from that year onward, was defeated by a vote of 83 to 43, with nine abstentions. However, lawmakers did approve a one-time tax on banks’ profits from 2023, ranging from 5% to 25%. Currently, banks in Ecuador do not pay taxes on their profits.
Government Revenue Projections
The proposed increase in the VAT to 15% was expected to generate approximately $1.1 billion per year, according to the bill. Meanwhile, the one-time tax on bank profits is forecast to raise $145.9 million.
New Effort to Raise VAT
Noboa’s new push to raise the VAT involves a measure called a partial objection, which aims to permanently increase the VAT to 13%. Additionally, the president will propose that lawmakers authorize him to raise the VAT to 15% “based on the conditions of public finances and the balance of payments,” according to a statement from Ecuador’s presidency. Legislators are set to vote on Noboa’s partial objection.
Security Concerns in Ecuador
Ecuador has recently witnessed a surge in violence, largely attributed to criminal activity. The country, which has traditionally been a popular destination for foreign retirees, has seen a rise in crime incidents, including a high-profile attack on a TV station and the assassination of a presidential candidate.
The deteriorating security situation has led to increased public demand for stronger law enforcement and crime prevention measures.
Legislative Setback for Noboa
The recent vote represents a setback for President Noboa, following previous legislative support for initiatives such as an electricity bill aimed at boosting power generation and attracting foreign investment, as well as a tax bill incentivizing youth employment.
