New tax increases in Ecuador

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The cost of living has increased in Ecuador, especially since tariffs on imported products were introduced in 2015. According to the Ecuadorian Government, these tax measures were implemented in response to the economic crisis triggered by the appreciation of the dollar and the fall in international prices for the country’s principal export product: oil. The crisis was deepened by the April 16 earthquake that hit the Ecuadorian coast, provoking the implementation of new economic measures. Below is a list of the main taxes that have risen in Ecuador.

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1. In May, new taxes were introduced by Rafael Correa’s Government to supplement falling tax revenues. The products subject to the new tariff include sugary drinks, cigarettes, commercial telephony and beer.

2. From June 1, Value Added Tax (VAT) in Ecuador will rise two per cent to 14%. The increase is valid for one year, as established in the Solidarity Act approved in May. This legislation seeks to raise $1 billion for the economic recovery of the areas affected by the recent earthquake. The VAT increase will not apply in the provinces of Esmeraldas and Manabi, which were hardest hit by the disaster that killed more than 660 people.

3. The Solidarity Act also establishes mandatory contributions over a limited period for those earning over $1000 per month. In addition, companies will pay a 3% tax on profits and individuals with assets worth more than a million dollars will pay a one-off 0.9% contribution. This rule also establishes a one-time 1.8% contribution on assets in tax havens.

4. In July, for the second consecutive year, the tariff surcharge on imported items will be extended. This measure was imposed in 2015, sparking protests against the national Government.

5. In his Report to the Nation in late May, President Rafael Correa announced two new taxes: a rise in inheritance tax and additional capital gains tax. Correa originally presented these proposals to the National Assembly but was forced to shelve them in the face of intense civil unrest.

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