2024-08-06 23:00:44
The current director of the SRI assured that a “comprehensive tax reform” is being analyzed, but that this will be left for 2025.
The Government, after the partial reduction of the subsidy on extra and eco país gasoline, will no longer take any more structural measures in the economy. It is fully in campaign mode and that is why President Noboa and his ministers are positioning that “we have already passed the hardest part.”
Director of Internal Revenue Service (IRS)Damián Larco, assured that, despite the fact that within the financing agreement with the International Monetary Fund (IMF) A tax reform is expected for November 2024, that task will be left for 2025, that is, for the next president.
«They are analyzing a comprehensive tax reformbut this will probably be next year,” Larco said.
Thus, after the scheme of Reduction of the subsidy on extra and eco-country gasolineeverything indicates that the Government of Daniel Noboa will enter fully into campaign mode and will no longer take any structural measures that could provoke reactions.
Andrés Rivas, an economist and business consultant, explained that the Government will now step on the gas in the campaign because the ideal scenario is to “win in the first round and have a legislative majority to then make any reforms.”
“The director of the SRI speaks of a comprehensive reform, which means that they are thinking about much more than just touching the tax expenditure“But now the priority is the electoral aspect,” said Rivas.
In this context, the statements of the President Daniel Noboa on Radio Sucre, when he said that “we have already passed the hardest part.”
According to official discourse, measures such as the increase in VAT and the partial reduction of fuel subsidies are sufficient to get the country’s economy moving forward in the second half of 2024.
He Minister of Economy, Juan Carlos Vega Malosaid that in the second half of the year, state investment and the impact on the economy of additional revenues to the treasury will be felt.
“The bet is clearly to position that all the necessary measures have already been taken and that the economy will take off thanks to that. It is clearly an electoral speech because the real figures tell a different story,” Rivas pointed out.
What does the agreement with the IMF establish regarding tax reform?
The IMF highlights that the Noboa Government, through its urgent economic laws, has managed to increase tax revenues by around $2.2 billion in 2024 (1.8% of GDP). However, only the VAT increase and ISD are permanent measures; while temporary taxes will leave a fiscal gap when they cease to be in force in 2025 (including tax remission)
For this reason, one of the commitments with the IMF, established in the report of the multilateral technical team, is that, by November 2024, a new tax reform to permanently replace the additional revenue from temporary taxes. It is expected to generate revenue equivalent to 0.8% of GDP, or around $970 million annually.
In general terms, the new reform should aim to review or reduce tax expenditure, that is, the exemptions, exonerations and refunds currently established by law.
In October 2023, during the previous Guillermo Lasso’s governmentthe then general director of the Internal Revenue Service (SRI), Francisco Brionespresented the estimate of tax expenditure in Ecuador and placed it at $5.15 billion annually.
But seven out of ten dollars of this tax expenditure goes to social benefits such as 0% VAT on basic products, public services, health and education.
Former Economy Minister Fausto Ortiz has said that the Noboa Government seeks to meet the goal of more tax collection with the IMF by tightening the rules for large taxpayers via the self-retentions.
For this reason, the SRI recently issued a new resolution changing the rules of the game for these self-retentions; which caused an immediate and categorical rejection of the Ecuadorian Business Committee (CEE).
Through his X account, José Antonio Camposano, executive president of the National Chamber of Aquaculturestressed that: “With these numbers (fall in sales and credit), the Ministry of Finance insists on extracting working capital from companies through self-retention schemes (advance payment of income tax) that do not respond to logic. Then they wonder why there is no economic growth in Ecuador.”
With this type of measures, the current Government is “buying time” until it can carry out, if elected, the comprehensive tax reform referred to by the director of the SRI. (JS)