With a promise to fulfill the campaign offer reduce taxes, reactivate the economy, elected president Daniel Noboa convinced that taxes will not be raised in tax reform which will be presented to the National Assembly.

So far, the new ruler has confirmed, without further details, that it is 12% to 5% VAT for construction materials and there will be tax cuts for the manufacturing sector stimulate employment talent and work.

Noboa spoke about the reform in tour in the United Stateswhere he held meetings with representatives of international organizations and investment banks, to whom he presented his work Government plan in a year and a half, how long will he be in office.

The goal is to reactivate the economy with incentives and thereby increase it public revenues to avoid falling into default public debt in 2026 or 2027, the president reported in Washington, on Monday, November 6.

The reduction and organization of the tax burden will be a an investment magnet for Ecuador, making the country more competitive compared to its neighbors in the region and promoting job creation, he presented on Tuesday the 7th to the CEOs of the financial group Barclays in New York.

Leopoldo Ocampo, president of the Chamber of Construction Industry (Camicon), and Javier Bustos, tax lawyer, analyze the short public announcements of the new ruler with anticipation.

They consider the initial proposals positive, but warn that they will not be enough to boost the economy if the state does not contribute. greater public investment and applies complementary measures for attraction more private investment.

On the other hand, Ocampo and Bustos commented that we have to wait and see how the process goes tax reform in the National Assemblysince depending on the negotiations and the political climate, the content of the bill could suffer important changes or be archived.

Daniel Noboa already warned during the election campaign for the second round that one of his proposals would be lower VAT to building materials. In a Sept. 26 radio interview, he said it would benefit “anyone who wants to do anything from redevelopment to a $700 million highway.”

Leopoldo Ocampo, president of Camicon, said that “everything that takes advantage of the possibilities to reactivate the country’s economy is convincing.” He said that the procurement of materials will be very beneficial for the real estate sector, but it will not necessarily help the economic revival in the conditions that the state requires.

“The real estate sector accounts for only 30% of all income from construction. What reactivates the country is public worksall the infrastructure created by public works… that’s what really reactivates construction, starts the production chain,” Ocampo said.

He explained that the low activity of public works led to the decline of the construction sector from 10 percent to 6.1 percent of the gross domestic product (GDP). “Every 1% of failure to contribute to GDP (gross domestic product) is equivalent to $1,000 million, lack of sources of employment, no job creation, no movement of that production chain,” the leader said.

He proposed that with the tax reform a public works reactivation plan, coordinate with decentralized autonomous authorities (GAD) and review the Law on Public Procurement.

According to Camicon data, in 2023 construction will generate 492,378 direct jobs; For every direct job, five indirect jobs are generated.

The Central Bank of Ecuador (BCE) projected this year that the construction industry will end with growth of 3.10%, but will close with no growth (0%), the chamber said in a report.

President-elect Daniel Noboa says in Washington that Ecuador needs a “bridging loan” to finance its government plan

Lawyer Bustos pointed out that from the preliminary announcements of the tax reform it can be seen “that the newly elected president understands that Ecuador’s growth rate is stagnating“; Therefore, one would not expect a reform intended for the entire period.

“The message he wants to convey, in some way to the business sector, and then to the rest of the country, is yes No tax system is sustained by increasing revenue, but by increasing investment. That is why it is important that as many companies as possible come to Ecuador and that more companies in Ecuador invest more”, summarized the expert and indicated that if this dynamic of more public and private investments is achieved, people’s consumption will increase.

Adoption of the law in the National Assembly

For the introduction of tax reform measures effective from January 2024 The assembly is mandatory approve the initiative in December.

For this reason, the bill that Noboa will submit, as soon as he assumes the office of the President of the Republic, will be urgent in economic matters, with which the Parliament will have a maximum of 30 days to analyze it and put it to a vote.

Then, the norm adopted in the Assembly will pass through the filter of the Executive Body, which, if there are no objections, can order its immediate publication in the Official Register before the end of the year.

The date of the inauguration of the newly elected president, Daniel Noboa, has not yet been defined and could undergo changes

ANDtime is short and the fate of the reform will depend on negotiations to add the necessary votes in the plenary session.

Furthermore, it will be decisive formation of commissions specialized departments for economic regime and economic development, since one of them will be in charge of processing the draft law.

Daniel Noboa, on his trip to the United States, said he estimated he could have a legislative majority “between 80 and 90 votes”, but he admitted that “Ecuadorian politics is magical, like Macondo, that anything can happen until the last day,” according to Argentine media. Infobae.

Considering fragmentation presented by the new National Assembly and the own interests of each political organization, it is to be expected that there will be some Red lines which condition the debate at the plenary session, depending on the content of the reform, noted lawyer Javier Bustos.

There could be a conflict if the bill refers to “sensitive topics for the population,” such as VAT rates, income tax or personal expenses, for example, the expert said.