The 500 taxpayers who have solid debts, according to data from the Internal Revenue Service (SRI) on its website, owe the Treasury about $2,082.5 million. In total, about 7,053 debts have accumulated in those few insolvent taxpayers. The amount consists of principal, interest, fines and additional fees. The original debts are usually much less than the debts plus interest, penalties and late fees. The thing is that several of these debts date from 1999 onwards.

For example, the ten largest debtors with firm commitments to SRI owe a total of $432.8 million: $158.5 million is the original debt capital, and $274.3 million – that is, 173% plus – is interest, penalties and additional costs. To give an example recently cited, in the case of Exportador Nobo’s debt, the principal is $33 million, while the interest and penalties amount to nearly $57 million.

Therefore, the tax remission would imply the remission of that larger item in exchange for the payment of the company’s share capital. At least that’s how the new tax amnesty proposed in the urgent law that President Daniel Noboa sent to the Assembly is understood, and which is currently being processed by the Commission for Economic Development. This Sunday there will be a debate on the first report, which will then go to the plenary session.

This bill received several remarks from tax experts, but also from certain political groups, such as Correismo, which in the past also applied the amnesty measure.

In reality, the said amnesty, which represents the forgiveness of interest, penalties and surcharges on tax debts, is not a convenient measure, says Napoleón Santamaría, a tax lawyer. He assures that the experts of the Inter-American Center for Tax Administration (CIAT), which is a technical organization, have several objections to tax amnesties. They recommend states not to do this because it encourages defaulters, fraudsters.

Indeed, Fernando Herrero wrote on the CIAT website that tax amnesties are unfair: they favor evaders over those who comply. “They are perverse incentives, signals for all of us not to comply. They create the expectation that there will be a next opportunity where penalties and interest will be waived and even, with luck, that we will enjoy opportunity rates.”

He also explains that politicians have a strong incentive for them. In a relatively short period of time, they manage to achieve revenue expectations that would otherwise be achieved in the future, perhaps in the next administration, or even never. Those who grant them also receive the recognition of the user, a political credit that could be important (perhaps for financing the next campaign). Taxpayers who don’t benefit, on the other hand, tend to keep quiet because the next opportunity could be theirs, he says.

In any case, an undeniable fact indicates that precautions must be taken so that these measures do not cause serious consequences: amnesties must be extraordinary events. He explains that the most successful measures are those that mark a break with the current practice. In this context, many countries used them so that companies with hidden profits and investments in tax havens could repatriate them.

Santamaría states that referrals are already widely repeated in Ecuador. There may even be taxpayers who, knowing this reality, prefer not to pay, put the money in bank accounts and then, when there is already a considerable debt with interest, take advantage of the forgiveness. He criticizes Valentina Centeno, the president of the Economic Development Commission that handles the law, who said it is an “effective form of collection,” because she thinks it sends a very bad message to obedient taxpayers.

Santamaría explains that in a legal sense it is worrisome that there is an amnesty whose conditions will be defined in the regulations, because otherwise everything related to tax matters must be specified in the law.

For this reason, he establishes some parameters that, in his opinion, should be included in the law.

In this way, any conflict of interest is also avoided, for example, in connection with the debt of the banana company Noboa, which amounts to 89 million dollars (of which 33 million dollars correspond to capital, and 57 million dollars to interest and penalties). He assures that while it could be argued that the chairman of Nobo is not the current owner of the company, he is his successor, so he could be a direct beneficiary.

Santamaría agrees that much of the rest of the text contains themes copied from former president Guillermo Lasso’s law. But, he assures, there are several problems in the new version. In free zones, there is no minimum employment of young people. To access the 100% deduction, it is necessary to hire 500 new employees. It is a very difficult goal to achieve, he says.

He believes that companies located in free zones must be labor-intensive. And put high capital, at least 10 million dollars.

Regarding the PPP (public-private alliance) chapter in the law, it is said that it is very important that this type of coalition is made for issues of new construction, reconstruction of massive construction, but not for very small issues such as building maintenance.

Criticism of the law also came from former president Rafael Correa, leader of the Civil Revolution movement, which has an important bloc in the Parliament. Correa described the bill as a “patchwork quilt,” which included failed issues like free zones and “unpresentable issues like tax amnesty.” Additionally, regarding the payment that must be made when the property is sold, he said this is similar to his capital gains tax proposal. “Time has proven us right again… This is the capital gains tax we proposed,” he said, although he noted some differences such as the tax being tied to the time of sale (the shorter the time, the higher the tax to pay) and that this resource went to the municipalities.