An increase in value added tax (VAT) from 12 to 15 percent would mean an increase in collection of an additional 1.3 billion dollars, said Damian Larco, Director of the Tax Administration (SRI), who appeared before the Commission for Economic Development of the National Assembly analyzing the emergency economic project.

On January 11, the President of the Republic, Daniel Noboa Azín, submitted a proposal for a law on combating internal armed conflicts as an urgent economic issue, where he proposes to amend the existing text of Article 65 of the Law on the Internal Tax Regime and establish a value added tax (VAT) rate of 15%, but clarifies that tax deductions and exemptions that applied to VAT will remain in force.

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

Larco pointed out that the proposal to increase VAT does not affect goods and services that are currently taxed at 0 percent rates, and clarified that the population with smaller economic resources is the one that consumes these goods and services at zero rates, which implies that the state stopped charging almost 2.7 billion dollars. Therefore, he said that the effect of this measure for the poorest is minimal.

The SRI official explained that the tax is on the outflow of foreign currency that has been taken and according to the decisions of the previous government, it should be reduced to 2% in 2024, but President Daniel Noboa canceled that measure and today the rate remains at 3.5%.

He indicated that if the tax on the outflow of foreign currency is raised to 5 percent, there would be an additional collection of 270 million dollars as a measure that could be taken, but that it has already been increased as of today, he pointed out.

Damian Larco pointed out that the proposal to increase the VAT has the advantage of generating immediate revenues and going directly to alleviating the fiscal crisis; So that is the measure that was taken.

After the presentation of the Government officials, on this first day of the analysis of the urgent project, the Vice President of the Commission for Development Blasco Luna (RC), He said he stands by what was indicated by the Minister of Economy and Finance Juan Carlos Vega, who showed openness to include the observations of the members of the assembly such as the increase in the foreign exchange outflow tax (ISD), the tax on great wealth and the special contribution of banks.

Luna questioned the position of the government minister, Mónica Palencia, who in her opinion intends to impose an increase in VAT, and according to the figures revealed by the official, the National Police needs about 300 million dollars to counter the internal armed conflict; He therefore insisted that with one measure such as a permanent increase in the ISD of three percentage points, the collection would reach $700 million and the emergency would be resolved.

The Civil Revolution lawmaker also highlighted a proposal to continue exploiting the ITT, which would amount to about $1.3 billion, a measure that is enforceable and would avoid raising VAT as a measure affecting popular sectors.