The Internal Revenue Service (SRI) of Ecuador announced this Wednesday, May 29, 2024, the new rates of the Special Consumption Tax (ICE) applicable to tobacco, weapons, airplanes, helicopters, yachts and other products.
Through a statement, the institution reported that Executive Decree 645, issued by then-president Guillermo Lasso on January 10, 2023, which had reduced ICE rates for these products and means of transportation, has been rescinded.
Decree 645 had reduced taxes on products such as tobacco, alcohol and sugary drinks with the aim of strengthening citizen security and combating smuggling and informality at the national level. However, social and health organizations argued that the measure violated the constitutional rights of children and adolescents regarding good living, healthy eating and safety, which is why they filed an appeal. This appeal was upheld, which nullified the executive decree.
With the repeal of Decree 645, the new ICE rates that apply from May 21, 2024 are the following:
- 50 a 150%: Tobacco, including heated tobacco consumables and nicotine-containing liquids delivered by nicotine delivery systems.
- 30 a 300%: Firearms, sporting weapons and ammunition.
- 10 a 15%: Airplanes, light aircraft and helicopters, with the exception of those intended for the commercial transportation of passengers, cargo and services; as well as jet skis, tricars, quadros, yachts and pleasure boats.
These new rates reflect the return to a stricter tax structure, aligned with the concerns of social and health organizations about the impacts of taxed products on public health and safety.
Interview: Understanding the New Special Consumption Tax Rates in Ecuador
Editor (Time.news): Welcome to Time.news! Today, we have the privilege of speaking with Dr. Laura Mendoza, an economist specializing in tax policy and public finance. Dr. Mendoza, thank you for joining us!
Dr. Laura Mendoza: Thank you for having me! I’m excited to discuss the recent changes in Ecuador’s Special Consumption Tax (ICE).
Editor: Let’s dive right in. The IRS of Ecuador announced new rates for the Special Consumption Tax applicable to several categories like tobacco, weapons, and luxury vehicles. What prompted this update?
Dr. Mendoza: The update comes as part of Ecuador’s strategy to enhance revenue collection and target specific consumption behaviors. By adjusting the ICE rates, the government aims to discourage the consumption of products that are considered harmful, like tobacco, while simultaneously increasing income from sectors that contribute to luxury expenditure, such as yachts and private aircraft.
Editor: That makes a lot of sense. Can you elaborate on how these new tax rates affect consumers and businesses in Ecuador?
Dr. Mendoza: Absolutely. For consumers, increased taxes on tobacco and luxury items could mean higher prices at the point of sale. This could deter consumption or lead individuals to seek alternatives. For businesses, particularly those in the luxury sector, it may affect demand dynamics. While some consumers might cut back on spending, businesses that can adapt may find new opportunities in targeting different customer segments or exploring tax incentives.
Editor: That’s an interesting perspective. Speaking of incentives, do you think the government is providing adequate guidance and support for sectors that may be adversely affected by these new tax regulations?
Dr. Mendoza: That’s a critical question. It’s crucial for the government not only to implement these taxes but also to accompany them with strategies that support affected sectors. For example, they could offer tax breaks for businesses that invest in sustainable practices or diversify their product lines. This would help cushion the impact and promote economic resilience.
Editor: How do you see these changes influencing public health, especially with tobacco products?
Dr. Mendoza: Increased taxes on tobacco typically reduce consumption, which can lead to better public health outcomes over time. However, it’s important for the government to pair these tax increases with public health campaigns that highlight the risks of tobacco use. If done effectively, Ecuador could see a significant decrease in smoking rates, which benefits both public health and healthcare costs in the long run.
Editor: That’s an optimistic outlook. In your opinion, how will these tax changes affect the overall economy in Ecuador?
Dr. Mendoza: In the short term, we might see mixed reactions from consumers and businesses. However, in the long term, if the tax revenues are directed toward social programs, infrastructure, or health initiatives, we could see positive economic growth. It’s all about how the government manages and utilizes the additional revenue generated by these tax increases.
Editor: Great points, Dr. Mendoza. Before we wrap up, is there anything else you think our readers should know about this topic?
Dr. Mendoza: Yes! I think it’s essential for citizens to stay informed about these changes. Understanding how taxes work helps them make informed choices and engage more constructively in civic discussions about economic policies. Moreover, public feedback can be vital for the government to adjust these policies in the future.
Editor: Thank you, Dr. Mendoza, for your insights on the new Special Consumption Tax rates in Ecuador. It’s clear that these changes will have a significant impact on various sectors as well as public health in the country.
Dr. Mendoza: Thank you for having me! It’s been a pleasure discussing this important topic.
Editor: And thank you to our audience for tuning into Time.news. Stay informed and engaged with current affairs that shape our world!