The Economic Development Commission plans to present the first report of the urgent project on November 14.
The economic authorities of the Government appeared this November 8 before the Economic Development Commission to support the Development and Fiscal Sustainability Project that seeks a collection of $ 1.9 billion in the next two years for economic contributions from natural and legal persons.
The Minister of Economy and Finance, Simón Cueva, told legislators that the project is aimed at strengthening the fiscal principle of progressivity, that higher-income taxpayers and those with higher wealth will contribute more.
Legislative committees reactivate appearances on proforma 2022 and urgent Fiscal Development and Sustainability Law
That creates an additional section of personal income tax for income over $ 100,000 per year; enhances the equity contribution to the largest companies for two years and adjusts the contribution for one year.
He affirmed that 100% of the tax reform proposed by the Government falls on those who were least affected by the COVID-19 pandemic. That the bill has some components that correspond to permanent tax revenues and other transitory components that imply a special contribution from some sectors in the years 2022 and 2023.
The permanent components that affect a good part of the income tax to both natural and legal persons, Cueva explained, take some time to be applied, if the tax increase is approved, the full effect of the tax collection will take one more year, that is, , 2023 will be full impact.
The Government maintains that in this collection, 87% of the total collection would fall on individuals with an income of more than $ 5,000 per month, and on special patrimonial contributions from both individuals and companies.
Cueva clarified that the reform will affect the 13% of people with monthly incomes between $ 2,000 and $ 5,000. This implies, said the official, that the bill would affect only 3.4% of the economically active population, more than 96.5% of the economically active population will not be affected in any way by the project.
Regarding deductions for personal expenses, the Economy official assured that these are maintained, but that there will be a slight variation in the ranges, since he said that the ceiling in Ecuador is very high, it is located at $ 14,576, one of the most high places in the region.
This high level of deductions for personal expenses implies a regressive impact on personal income tax, Cueva said, for which he justified that the tax reform proposes that the deduction for personal expenses would be up to $ 5,000.
He stated that with the tax reform the range of estimated tax collection in one year will rise from $ 434 million to $ 460 million. This item implies affecting people who earn $ 2,000 per month upwards.
According to the income distribution in Ecuador, 273,726 people represent 3.4% of the economically active population and 96.6% are below these ranges and are not affected by these changes.
That people who earn between $ 2,000 and $ 2,500 per month are 85,456 and would have an impact of $ 28 million in tax collection.
In the range between $ 2,500 and $ 3,000 in monthly salary there are 53,201 people, and it would have an impact of $ 41 million; while 95,528 people who earn a monthly salary between $ 3,000 and $ 5,000 would contribute $ 136 million; and the 42,760 people who earn more than $ 5,000 per month would have an impact of $ 263 million.
Therefore, Cueva insisted that 94% of the collection impacts those who earn $ 2,500 per month onwards, it is a progressive reform that affects more those who earn more.
The legislator César Rohón, before the PSC, stated that he has a different vision from that of the Government, that deductions must be maintained because they are fundamental for the country, since a tax culture was generated and by trying to reduce it to $ 5,000 it does not contribute to formality .
Regarding the economic contribution of the companies, the Government proposes that 1,932 companies with an equity that exceeds $ 5 million contribute, they are companies with economic solvency related to mines, commerce, manufacturing, banks and insurance. (I)
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