Ecuador: Constitutional Court gives way to tax reform but refuses to create free zones

The Constitutional Court of Ecuador approved on Friday a bill with a substantial tax reform and denied another that proposed the creation of free zones as poles of economic development in the country. Both were sent by the president William Lassowhich governs from the dissolution of the National Assembly with the counterweight of the highest constitutional body.

Almost a month ago and based on constitutional provisions, the Ecuadorian president dissolved the Assembly and shortened his own term of office in the midst of an acute political crisis between both powers of the state.

The Constitutional Court, in a message posted on Twitter, justified its approval of one project and its rejection of the other in that the text of the first, on tax reform, does not cause manifest or notorious incompatibilities with the Constitution. It was unanimously approved.

Regarding the law for the creation of free zones and investment attraction, that Court also unanimously denied the project, invoking article 148 of the constitution, which gives him the power to approve or reject projects sent by the executive in the absence of the Assembly.

Among other issues, he argued that the texts incorporate stability and survival clauses for a 20-year term, therefore “It is not a temporary economic measure, it is the reflection of the vision of this government to face the structural economic problems of the country”.

In the denied project, Lasso had proposed the creation of free zones with the argument of generating work and promoting economic activity in some geographical areas of the country.in exchange for tax and customs incentives.

As for the project that passed the constitutional filter, it will immediately become law and provides for the increase in tax-deductible personal expenses from the current $5,000 to $15,200 per year. In addition, pet expenses can be deducted from taxes, while low-income entrepreneurs will not pay taxes. Meanwhile, companies that promote sports betting will pay 15%, as will bettors, among other elements.

Lasso spoke on Twitter after learning of the Court’s approval and highlighted “that allows 195 million dollars to stay in the homes and that thousands of popular businesses do not pay taxes”.

n, director general of the Development Studies Corporation, in statements to The Associated Press said that it is not a good fiscal moment to reduce taxes “because the income of the State budget is falling and high-income people are being favored”. This reform has an impact on the fiscal box of about 200 million dollars.

Santiago García, president of the Pichincha Economists College and professor at the Central University, considered that Ecuador is one of the few Latin American countries that has not managed to consolidate free zones and was “an important mechanism that can be a lever to generate employment and prop up certain exports”.

While the Assembly remains dissolved and while a new president and legislators are elected in Ecuador, Lasso will only be able to send economic or administrative bills that must be reviewed by the Constitutional Court, which analyzes whether the proposed texts violate constitutional norms. The new legal bodies approved may be repealed or ratified by the new Legislature that must take office in December.

Lasso will be in power until December, when he will be replaced by the new president elected in the August 20 elections. In the event that there is no winner in the first round, a ballot is scheduled for October 15. On November 30, the credentials will be delivered to the winners.

Source: AP Agency