Although the Economic Efficiency and Job Creation Act sent by President Daniel Noboa contains positive provisions on the creation of free zones, there are others that seem harmful. Let’s consider the case of self-deduction of up to 3% of the income of the so-called “big taxpayers”.

Let’s start with the basics. The company’s income, ie sales, is not proportional to profit. There are cases where even though the company’s sales have increased, they have not increased enough to offset the increase in operating expenses and therefore get a negative result.

This is not something hypothetical. In fact, that’s what happened to several shrimp producers over the past year: China’s economic slowdown has put pressure on global shrimp demand as Ecuadorian producers have become more efficient, producing more shrimp. An abundance of shrimp, lower global demand, rising costs such as fuel (subsidies for which the industry has been scrapped, as it should be scrapped entirely), are all factors that have resulted in a complicated year for the sector. Unusual variations in climate and water have caused them to re-evaluate their production methods and in many cases have had to adapt their facilities or hire more staff and/or supplies to avoid losing money in the face of new market conditions.

We live in a naturally uncertain world. Therefore, entrepreneurs cannot know with certainty in advance what their outcome will be. But in the fantasy world of public administration, the nation’s highest-taxing companies are asked to assume a positive bottom line and give up just 3% of their liquidity to meet the ever-primary needs of the treasury.

“Only 3%” does not sound serious, but it may be the last straw for some companies, and it is not so much a question of the percentage, but in which part of the economy these resources are harvested the most. A shrimp farm that faces a crisis in its production model and must respond quickly with new investments and costs to survive will be hampered in its efforts and many may fail or may find itself needing to reduce production and/or create jobs to serve treasuries.

According to Census Consultores, companies giving up these resources to deal with public sector liquidity could only hope to tip any balance in their favor until 2025, when another government comes in. This creates uncertainty for good reason, as it remains to be seen whether the next government will be willing to return the balance sheets in favor of the companies, or whether the affected companies will survive until then. All this in order to improve the inflow into the treasury, but not necessarily the revenues, because they may fall due to this and other measures that inhibit economic growth, investments and the creation of new jobs.

Fiscal balance is important, but in order not to sacrifice the main goal, which is growth, it must be sought by reducing spending. (OR)