The government submits a new tax reform

ECUADOR - In Brief 20 Nov 2019 by Magdalena Barreiro

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Minister Martinez will be submitting today a new tax reform much leaner than the failed bill of last week. The new bill needs to have different proposals to be considered as new piece of legislation and be treated as urgent and be in effect next year. This reform if approved will help the government to raise $540 million or $200m less than the original one. It includes the elimination of the advanced income tax for corporations as well as the one-time tax paid by the export sector. It also proposes a differentiated income tax rate for agricultural workers. On the other hand, it keeps the initially proposed special contribution for firms with revenues of $1m and up that would be in effect for three years. And tax deductions based on expenditures would be eliminated for those with annual income higher than $100,000. Both proposals were supported by a majority of legislators and also by the Indigenous groups. Albeit the new bill does not include the proposals presented by the CONAIE (National Indian Confederation) which among other included a reduction of VAT to 10%, it contains points difficult to be opposed to by legislators such as the elimination of fines and past-due interest payments for student loans. Minister Martinez has maintained long conversations with legislators from the official party to discuss the new bill in order to gain support and the response has been so far favorable. In this instance, the government might count with the necessary 70 votes for partial or total approval. If approval is partial, the executive veto will do the rest.In the meanwhile, Gerry Rice representing the International Monetary Fund stated the IMF will continue working with Ecuado...