The authorities warn of economic and security consequences if VAT is not increased to 15 percent

On the first day of the processing of an urgent economic project that proposes to increase the VAT to 15% in order to face the internal armed conflict, social and economic crisis, the ministers of the economy Juan Carlos Vega and the governments of Mónica Palencia warned of the complications that the country would have if the National Assembly does not approve a project proposed by the President of the Republic, Daniel Noboa.

After receiving the official explanations on the scope of the measures proposed by the Government, the legislative commission expressed its opinion at the reserved session to receive information on the application of military and police actions in the fight against terrorist groups in the country.

In the meantime, parliamentarians of the Social-Christian Party, the Civil Revolution and independent representatives initiated a debate on alternatives for financing the internal armed conflict, in order to avoid a three-point increase in VAT. These approaches range from increasing taxes on foreign currency outflows, improving tax collection, establishing special contributions to bank profits, ending fuel subsidies, and even re-consulting the country on ITT Yasuní oil exploitation.

The legislative commission, chaired by Assembly member Valentina Centeno (ADN), has five days to prepare the first report on the project for the plenary session, where, according to lawmakers, it will present some observations and financing alternatives for the internal armed conflict.

During the presentation of the reasons why the Government proposed an urgent economic project, Minister Mónica Palencia harshly and harshly reprimanded the members of the assembly. and said she felt depressed and worried because the legislator’s narrative was trapped in a logic that kept the country structurally backward.

That the only thing you hear from legislators is that you wonder where the money is coming from and how much is needed. But the question must be: what are the resources of a united enemy who has been penetrating the structures of the state for years and who is able to plant a bomb, blow our heads off at any moment and who is able to destabilize the country? ?, He said

The logic is that “if we don’t unite strongly, we lose territory, sovereignty, and we continue to discuss whether we want to increase for three, six months or a year; Gentlemen, we are the country that pays the lowest VAT,” he replied.

He reproached the legislators that the least they can do is to wear an Ecuadorian jersey, and that the government is committed to fighting tax evasion, as well as private banks paying taxes on the outflow of foreign currency. The problem is serious, structural and complex, he insisted.

Palencia said that much more is needed than funding the vests, because the end of the conflict is not dictated by the state, but the conflict was already there. “They were killing us, we reached almost nine thousand people killed by intentional murders last year,” he explained.

Among the urgent actions, the government official stated the need to strengthen security in the Amazon, that it is strategically important and that aircraft with appropriate armor are needed for this.

The official pointed out that she is not going to the Assembly to ask them to increase the VAT by 3 percent, but to ask them to feel for the great homeland and the country. A 3 percent increase in VAT is the minimum, beyond any party, said Palencia, who attended accompanied by the police chief, who also made a presentation, but restrained without the presence of journalists.

Minister Palencia said that it should not be understood that the issue of security is the issue of the Armed Forces, the National Police, the MUP, the Ministry of Defense and the Government. “This is a large-scale problem and we have to move forward with urgent liquidity and “the only thing that gives us urgent liquidity is VAT, which is minimal”, he emphasized.

Another point the government official made to the lawmakers was that domain seizure issues are urgent to access ill-gotten assets, produced resources and even interest before it is achieved. .

At the end of the presentation, Palencia stated that he was happy for the group of representatives he found in the National Assembly who are reacting in accordance with the situation, and pointed out that he is worried about the future of Ecuador. However, he said that he is leaving with the certainty that the National Assembly will increase three points.

He asked for the political support of the Assembly, because in the coming days there will be news, there will be signs, and for that he asked for the political support of the assembly members. “We will pursue economic crime, financiers,” he added.

Minister Mónica Palencia assures that she will prosecute ‘economic crime’ and asks for the support of the National Assembly

Dollarization in danger

Minister of Economy and Finance, Juan Carlos Vegahe explained to the members of parliament the economic situation in which the government found itself and the economic difficulties the state is going through in order to fulfill its monthly economic obligations, such as the payment of salaries, budgets, income to GAD and payments to more than 30,000 suppliers.

He presented the parliamentarians with a catastrophic scenario and asserted that if nothing is done and no measure is taken, such as increasing the VAT by three points, the crisis will deepen and there will be increasing pressures of insecurity. It is even possible, he said, to reach a scenario where salaries in the public sector cannot be covered, and in 2024 we could end up with 10 billion unpaid obligations.

The lack of liquidity would cause an impact mainly on the disruption of the payment chain, effects on the financial system and “finally threaten dollarization, which is a closed system that depends on the inflow and outflow of dollars; and without taking any measures we are closed to any financing by foreign entities,” he indicated.

What has been done at the moment is the application of the law of economic efficiency, which is to encourage investment and create new jobs for young people and opportunities in sectors such as construction. This law will also collect an additional 2,098 million dollars aimed at higher withholdings for the largest companies in the country, and for the financial system it has been maintained that the ISD remains at 3.5% and does not fall to 2%.

He insisted that the main measure taken by the Government is to solve the problem of insecurity and enable large and small companies to operate peacefully, collect and sell, get employed and come to work sites; But maintaining this war against drug trafficking and organized crime comes at a cost and puts additional strain on the fiscal coffers.

He pointed out that this war has no time limit and has just begun, and that the financing line defined by the Government is an increase in VAT, which is not a perfect measure, but that they are open to other ideas and proposals. , although VAT has a lot going for it.

That everyone recognizes that it is an indirect tax and that it is easily collected, that Ecuador has the lowest VAT in Latin America, and what it proposes is an increase slightly less than the average in Latin America, which is 15.5%.

Suggestions

President of the table, Valentina Centeno, He stated that the work that the commission will do is with the feeling of a country that seeks to undertake and adopt measures that will benefit all Ecuadorians the most, understanding the economic and social crisis we are experiencing. And clarified that VAT is not a regressive tax as claimed by some legislators.

Representative of the Movement of the Civil Revolution (RC) Blasco Luna He complained to the Minister of Government, Mónica Palencia, who came to the Assembly to “boyfriend” the members of the commission and asked for respect because the commission gives alternatives to the VAT increase and it is not right to show from that Yes or yes, the three points must increase the VAT.

He stated that he does not agree with seeking alms from groups in power by asking for special contributions to somewhat alleviate the needs of the National Police, but he agrees with charging the wealthy sectors an additional tax to collect more efficiently. He also pointed to the need to apply a tax on luxury vehicles that exceed $30,000.

Viviana Veloz (RC) He specified that there is a determination to contribute to all the necessary efforts to first restore the authority of the state, to regain control over prisons and to stop them being centers of crime development, but that this will not mean support for an increase in VAT.

PSC Legislator Jorge Acaiturri-Villa He said that he doubts the VAT collection figure, and suggested that a way to finance the internal conflict be found, perhaps by applying a temporary measure. But tax collection must be improved by controlling evasion.

He also said that it is necessary to analyze the repayment of the external debt, the reduction of the size of the state, the contributions of the banks as a result of their profits, the sale of non-productive real estate assets and ask the country again about the need for oil exploitation in ITT Yasuní.

This proposal to exploit the ITT also had support among the legislators of the Civil Revolution, from the member of the assembly Steven Ordóñez (ADN) and Pedro Velasco (Avanzo), since the latter said that responsible exploitation must be carried out and also raised the need to abolish subsidies for fuel.