The Legislative Administration Council will analyze two projects to repeal the tax reform

The possibility that the National Assembly enters to process two bills that seek to eliminate the tax effects of the law for economic development and fiscal sustainability after the COVID-19 pandemic will depend on the two delegates that the Democratic Left has in the Council of Legislative Administration (CAL).

The CAL is convened for this Friday, January 28 at 4:00 p.m., to learn about and decide on the bills to repeal the organic decree-law for economic development and fiscal sustainability presented by legislators from the Pachakutik and Unión por la Esperanza (UNES) in November and December 2021. In the plenary session last Tuesday, 86 legislators spoke out to debate a request that CAL process the two bills presented.

CAL will define if it qualifies two bills that seek to repeal the new taxes of 2022

The votes of the legislators Yeseña Guamaní and Johanna Moreira, delegates of the Democratic Left before the CAL, could tip the balance on the processing of the projects. The votes in favor come from Assembly members Darwin Pereira (Pachakutik) and Ronny Aleaga (UNES); The position that Guadalupe Llori (Pachakutik) and Virgilio Saquicela (BAN) will assume is unknown; while Nathaly Arias (CREO) will accept the report of the Legislative Technical Unit (UTL).

On November 29, 2021, President Guillermo Lasso ordered the publication as a decree law in the Official Registry of the Organic Law for Economic Development and Fiscal Sustainability after the COVID-19 Pandemic, where he explained that the urgent economic bill was discussed in the second debate on November 24 and 26, 2021, in the National Assembly, without having been approved, denied or modified.

The Minister of Economy and Finance, Simón Cueva, this January 26, stated that this Government is respectful of the division of powers and that he understands that there may always be political issues in this regard.

However, he clarified that according to his understanding “the law was approved by the Ministry of Law, it is in operation, in full execution and should continue in that sense.” He recognized that the tax reform can generate greater pressure for small sectors of the population, which is always progressive. That is, the higher the income, the greater the tax pressure. In any case, it was ratified that this law affects 3.5% of the population.

He said that the most important thing that citizens should know is that the effort of a part of the Ecuadorian population should translate into profound improvements in the issue of spending to strengthen public finances and focus spending on sectors that need it most. In this sense, he pointed out that there is a Government commitment that public spending be very austere and not inflate it.

Informe UTL

The report of the Legislative Technical Unit (UTL) recommends that CAL not qualify the two projects presented by legislators Viviana Veloz (UNES), Patricia Sánchez, Salvador Quishpe and Ángel Maita (Pachakutik), because they do not meet the formal requirements established in the articles 134, 135, 136 and 301 of the Constitution; but the proponents remember that the document is not binding and that it will be the Administrative Council who will decide if they make the processing of the proposals viable.

The articles alluded to by the UTL are related to the competence to present bills that create, modify or abolish taxes, increase public spending. They argue that the President of the Republic is the only one competent to submit a bill that abolishes or changes taxes.

The objective of the two projects, presented by UNES and Pachakutik, is to repeal the entire regulatory body that was published in Official Gazette 587 of November 29, 2021, therefore, nullify all the reforms applied to 22 regulatory bodies, related to the modification of the ranges of the progressive rate of the income tax, the new deduction of personal expenses, the elimination of the inheritance tax for the children of the deceased or for the surviving spouse, the temporary contributions to the patrimony of the people natural and corporate, among other tax reforms that came into force in January 2022.

En the analysis formulated by the UTL, it is emphasized that the current law seeks to cover the economic impact on public finances generated by the pandemic and its direct consequences on public and private employment, and to promote fiscal sustainability, the reorganization of the tax system and legal certainty for economic reactivation. Estimates made by the SRI foresee a positive impact of the tax reform, since it is estimated that the collection will increase by $1,406.43 million, which represents 10.36% of the tax revenue estimated for 2021.

Representing the UNES bench, Pabel Muñoz warned that what the UTL points out regarding the exclusive competence of the President of the Republic does not make sense, because there is a lapidary article in the Constitution, he said.

It refers to the last part of article 140 of the Constitution, where it grants the National Assembly the power to modify or repeal, at any time, a project classified as urgent and that has been published as a decree-law by the President of the Republic. . And the procedure must be ordinary.

Muñoz also pointed out that the argument that the economic authorities have that for the ordinary process of the repeal project there must be an economic report by the Ministry of Economy and Finance is not valid either, which is not true, he noted, because the last part of the Article 74 of the Planning and Public Finance Code clarifies that this requirement applies only to initiatives that come from the Executive.

The UNES assemblyman warned that the UTL does not take as a reference the legislative precedent of 2019, when the National Assembly, at the request of CREO legislators, processed the repeal of a project published as a decree-law on the green tax.

What’s more, Muñoz maintained that the UTL report is flawed, since at times it goes towards the qualification of the project, but ends with the suggestion of not qualification. The only way out is for the CAL to reason based on three elements: article 140 of the Constitution, article 74 of the Public Finance Code and the legal precedent of the previous legislature.

Legislator Patricia Sánchez, from Pachakutik, who presented the repealing project on November 30, 2021, affirmed that there is sufficient legal basis for her proposal to be qualified by the Board of Directors. If not, “it will surely be due to political pressure from the government, but we will continue to insist,” he stressed.

Sánchez said that legislator Darwin Pereira, delegate of Pachakutik in the CAL, will vote for the qualification of the repeal project, and said he was unaware of the position of the president of the National Assembly, Guadalupe Llori, who also has a vote in the CAL.

There are seven votes in the CAL, added the national legislator, and those votes will have to be expressed in tune with what society is asking for, since it has been seen that people are becoming aware of the harmful effects of the project that is related to the tax burden of the middle class. “CAL has the political responsibility to define which side of history it is on,” warned Sánchez. (I)