Given that the National Assembly has thirty days to process the urgent economic law directed by President Daniel Noboa on the increase in value added tax (VAT) from 12 to 15 percent, the government anticipates that the increase would come into effect on March 1. . , 2024.

The increase in the rate of this tax is proposed in order to face the security, social and economic crisis that the country is going through. The bill arrived at the Secretariat of the Assembly after 11 p.m. on Thursday, January 11.

The impact on collection of this three percentage point increase in the VAT rate is estimated at USD 1.306 million per year, according to the projection of the Tax Administration (SRI). This is from January to December, but since the law “will be valid from March 1, the collection would amount to 1.071 million dollars, income that would help reduce the deficit of the state budget for the current year”, according to the documentation submitted to the Presidency with the bill. Republic.

In 2023, this tax collected 8.444 million dollars for the state, according to the statistics of the Internal Revenue Service (SRI).

The purpose of this new Nobo law is to collect taxes to fulfill the obligations of the state in the implementation of plans, programs, actions and public policies for the social sectors of Ecuador, as well as to stabilize public finances, redistribute income and face the need for resources due to the internal armed conflict and serious the social and economic crisis that Ecuador is going through.

Funds collected by increasing the VAT rate will not be considered subject to pre-allocation.

Tax credits and exemptions applicable to value added tax will remain in effect.