The government, undoubtedly with good will, sent the tax and economic reform project to the National Assembly. Good will and a triple wish: to stimulate the economy, create jobs and improve fiscal accounts. Have these goals been achieved? Little, very little or maybe nothing. The problems are deeper than small tax changes.

Growth? Tax breaks are offered for investments in non-renewable energy sources, free zones, VAT for construction purchases and a few more. If growth depended on small things, it would be easy to grow, but it is much more complex: reduce the risk of the country by improving public finances and even more the risk that we all feel inside the country (not only physical, but too big). entrepreneurship risks), attacking insecurity and electricity problems, structural reforms (for example, labor and social security), continuing and closing trade agreement negotiations, attracting more international banking, ending doubts that dollarization can be ended (closing the central bank would be very good)… and more.

What changes does the new tax reform proposed by Daniel Noboa bring?

The legislative and technical unit recommends the qualification of the emergency project submitted by Daniel Noboa

Employment? Tax credits are offered for jobs between 18 and 29 years old. Will it change the labor market? Obviously not. What is needed is greater economic growth (see the previous point) of at least 4% per year in order to have more and better jobs. Also, a fundamental and common-sense labor reform that creates a more reasonable and adapted relationship between workers and employers. Such a reform cannot be replaced by simple tax incentives.

Public finance? At no time is the important thing considered: reducing so much useless and unproductive public spending within a total of more than 40,000 million dollars a year, but we are always trying to increase revenues or more debt. This project aims at the first because it is predicted (the reality will be less) to collect about 800 million more net, to which is added another 800 million from the tax amnesty (amnesties create very bad precedents). A good tax reform would consist of lowering taxes for everyone (25% for companies is excessive, to 37% for individuals or ISD of 2% in 2024), also significantly simplifying the process and removing so many specific exemptions. The reform does not say anything about the first 2, but creates bigger “holes” in the compensation system. Roads must be concessioned (and start some like the Quito/Guayaquil highway) and other projects like electricity or oil. In addition, so many inefficient state companies must be transferred to the private sector, and targeted subsidies for fuel (at least in public transport) must be abolished, but all these funds should not feed the gluttony of the state, but the citizens’ fund to, for example, capitalize the reformed pension system (if is not reformed, it would be a waste of money).

Now, everything discussed here may be impossible in a government of only 16 months and in a still complex political environment, but some things must be possible. Which ones?… or maybe we can only take very small steps like this reform. It is a pity to see the country in such a way. Maybe that’s the only way, I hope not. (OR)