Summary 2021: The tax law and the agreement with the IMF, two economic milestones in half a year of Government

On November 29, 2021, the Government achieves, not without first having several setbacks, the validity by ministry of the law of the Law of Economic Development and Fiscal Sustainability. This, which is a tax reform, will allow you to have permanent income of $ 1.9 billion in three years. In 2022 alone, the treasury will expect to receive about $ 800 million. In the first instance, this law is part of a mega-law called Opportunity Creation, which is rejected by the Legislative Administration Council (CAL) for allegedly not complying with constitutional issues, without even allowing its debate.

The regulation does not have the support of the Assembly despite the rapprochement of Guillermo Lasso with Pachakutik and Izquierda Democrática. And it is only approved when the Union for Hope (UNES) bench abstains from voting for its file. Criticism of an alleged pact between the regime and Correísmo has emerged from various political sectors, which both groups deny.

The regulations apply higher taxes to the wealthiest sectors of society. Thus, companies with assets of more than $ 5 million and people with assets of more than $ 1 million and conjugal partnerships with more than $ 2 million must make a temporary contribution to contribute to the tax coffers. The law also includes a component of higher taxes for a section of the middle class that earns more than $ 2,000 per month. Progressively, this group, made up of some 274,000 people, will have to pay a higher tax burden. The reform also brings a series of measures to regularize assets abroad and obtain future tax contributions. In tax matters, the law also comes with various concessions, such as a reduction in the value added tax (VAT) and the special consumption tax (ICE) on various products.

The regulation also gives way to reforms in the oil field, to open the possibility of migration of contracts to the participation modality. Certain reforms in telecommunications are also allowed, which could generate greater services to the rural sector, although to the detriment of revenues to the treasury.

The renegotiation of goals with the International Monetary Fund (IMF) takes place in mid-September. With this, resources for $ 800 million are received from the multilateral organization. And the tax reform was key so that, during the fourth review of the agreement with the IMF, the disbursements for December (about $ 700 million) could be approved. However, the issue has been delayed and could be in late January or early February.

The Minister of Economy and Finance, Simón Cueva, indicates that any IMF review implies a macroeconomic assessment of the country, considering oil prices, international inflation, and the pace of recovery, and that these issues are volatile in post-COVID times.

In addition, he says, there is an analysis of public policies, such as fuels and the approval of the tax law, and that implies a more detailed and technical review. Additionally, there are bureaucratic aspects of the organizations that meet internal deadlines.

The Government will seek in 2022 the approval of the other components of the Opportunity Creation Law that was denied in the Assembly. Thus, in the first days of January he would send the Investment Law and, after a dialogue with society, he could send the labor part. (I)