The proposal of the Government of Daniel Noboa to raise the percentage of VAT (value added tax) from 12 to 15% would distance it from countries with a lower rate.

The increase in VAT to 15 percent is part of a new urgent project to deal with internal armed conflicts, social and economic crisis, the authorities said. “We have to take tough economic measures and we have to be coordinated because the war costs and costs, so we have to take important actions and measures together with the legislation so that we can also carry out the financing of this fight against terrorism,” said President Nobo to confirm the tax increase.

At 12 percent, Ecuador is currently among the countries that charge the lowest value added tax (VAT) in the region and is one of those that applies a zero rate for education and health services, according to an article published by the British channel BBC Mundo.

Daniel Noboa hopes that by increasing the VAT to 15%, he will collect 1.306 million dollars per year, which will go to social security and protection

According to data from Baker & McKenzie, a legal firm that advises global companies, and cited by the BBC, the average VAT charged worldwide is 15%. And the average for Latin America is below that percentage: 9%.

VAT rank in Latin America (2024)

VAT was introduced in Ecuador in the 1970s as part of a tax reform. Since then, it has seen several changes to its rate and tax base. It has historically been unpopular because it directly affects the prices of goods and services.

In the previous government, VAT was reduced to 8% for tourist services and only during special holidays in order to encourage the development of national tourism.