[Politics] Delivery of tax reform shows signs of political unblocking in Ecuador

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The new bill for a tax reform presented on Thursday, October 27, 2021 to the National Assembly by President Guillermo Lasso, reveals -at least for now- indications of a political unblocking in Ecuador, where the Executive and Legislative must now get along for your approval.

The bill for economic development and fiscal sustainability, which the Assembly must deal with in 30 days, is the first of three that Lasso has planned in his fractional package of reforms, which were rejected last month.
With this, the President accepted the position of the Legislature not to send the entire package, but to do it in phases: the first, the labor law will follow and, later, the investment law.

The economic analyst Alberto Acosta Burneo welcomes the procedure adopted by the Executive prior to the sending of the project that, according to the Presidency, was prepared "by collecting the suggestions of various social and political sectors of the country."

"On the political side, I think the government this time has done the right thing and I think there is a better chance that the project will be approved," Acosta Burneo said, underlining that "the game of democracy is to reach consensus."

The beginning of this dynamic "will be fundamental for the Government because there are many other issues that have to be discussed and dealt with, and it is necessary to unblock the relationship between the Executive and the Assembly," he said, noting that the possibility of going to the call " cross death ”was a very dangerous gamble.

Last Thursday, Lasso said that "for the moment" he will leave the idea of a cross-death in the book of the Constitution and will choose the route of "dialogue" to carry out his bills.

 

"Let's leave it in the Constitution, for now that it is in the Constitution," Lasso replied in an interview, on whether he still considers among his options the tool to dissolve Parliament in the event that his reform projects do not advance.

Acosta Burneo presumes that the Executive "is willing to give in on many things," and has even suspended the gradual rise in fuel prices, "something that he had said he was not going to do. I think this goes very hand in hand with trying to get endorsements in the Assembly for their projects ”.

Given the facts, Acosta Burneo believes that the situation is "gradually unlocking" and stresses that "there has been an opening to deal with the issues, which is already a great step against the blockade that we had on both sides, because neither the Executive nor Legislative they wanted to know nothing about each other ”.

And he showed his hope that what is currently happening at sea is a "thaw of the relationship": "I think the Government is giving in and finding a way to unblock this problem of entrapment between the Assembly and the Executive."

But if he sees positive aspects politically around the draft Tax Law, the analyst considers that it is "not appropriate" economically because the economy is "still very weak."

"Raising taxes on companies and individuals will help with the tax issue, but the underlying issue is job creation, it is economic activity," he commented, noting that "withdrawing money from companies at this time implies less investment, and withdrawing money from people is less savings and less consumption ”.

 

But the Presidency maintains that the reform project complies "with the principles of progressivity and tax justice" and, after its approval, the Government expects to collect "more than USD 1.9 billion" in its first two years.

Ecuador is dragging an economic crisis, which worsened with the pandemic, and that the new government, which came to power last May, wants to correct with a wide spectrum of reforms that have collided with social groups and unions due to their impact on the lesser po[CENSORED]tion. wealthy.

However, according to the Presidency, with the new fiscal plan, 96.6% of the economically active po[CENSORED]tion will not be affected, since “the main effort will fall on those who earn more than USD 5,000 per month, have a greater wealth to one million and the largest companies in the country ”.

"Those who earn between 2,000 and 5,000 per month will make a small contribution, proportional to their income level," he says.
It also establishes that, for two years, the largest and most solvent companies in the country, with an equity greater than five million, make "a solidarity contribution of 0.8%."

And although they are measures that, if approved, will help the fiscal issue, Acosta Burneo maintains that “the challenge of the Government is to accelerate (economic) growth and that is not achieved by charging more taxes to those who invest or to families, but by encouraging investment and putting public spending in order ”.

 

Link: https://www.elcomercio.com/actualidad/politica/desbloqueo-politico-lasso-asamblea-reformas.html