Ecuador begins April with a VAT increase and fear of possible price speculation

The increase of Value Added Tax (VAT) from 12 to 15% applies from April 1 in Ecuadorin the midst of citizen concern about possible price speculation, but with recognition of the need for resources to finance security actions in the country, hit by violence.

On March 15, the president of Ecuador, Daniel Noboa, decreed the increase in VAT as he had announced after managing to carry out the reform that allowed him to raise the rate to that level.

The reform increased VAT on 12% to the 13%but allowed the president to increase it up to fifteen% following a favorable report from the Ministry of Economy and Finance, with which it hopes to increase collection by about US$1.3 billion.

Noboa played the unpopular card by raising this tax to balance the State’s fiscal balance, after having received an administration with a deficit of about US$4.8 billion in 2023, which is equivalent to almost 5% of the gross domestic product (GDP), and also to finance the “internal armed conflict” that he declared in January to organized crime gangs.

Increase in fuel

Although the Government asserts that the new rate will not affect products in the basic basket, citizens consulted by EFE believed that it will increase because the cost of fuel and gas for domestic use also increased since Monday, although not significantly. , according to the Executive.

As an example, he noted that a car that fills its tank with 10 gallons (37.8 liters) of gasoline ‘Extra’ (the one with the most use) will pay 5 cents more to fill the entire tank.

Regarding diesel, he indicated as an example that a truck that is filled with 20 gallons of diesel will have to pay 0.54 cents more, and an 18-ton truck, which fills its tank with 52 gallons (196.8 liters) of diesel will pay US$ 2.40 more.

With the increase in VAT, the gas cylinder for domestic use will increase by 5 cents at the deposit, but Luis Cuyo, an artist who sells his oil paintings in the traditional El Ejido park, in Quito, asserts that the delivery people of gas cylinders have raised the price by higher figures.

Speculation?

Cuyo maintains that especially the middle class will be affected by the increase in VAT and comments that the products he uses to paint his paintings have increased, even before the new rate comes into effect.

“The tube of oil was worth between 6 and 7 dollars, now it is worth 15, 14 dollars, since it was mentioned that the VAT was going to increase,” stated, while Hernán Lazo, another crafts seller, said that the increase “affects everyone”.

And although he maintains that “in fact” The prices of many products are going to increase, he still maintains the prices of his crafts as before.

Concern about the effects of the VAT increase is also shared by José, a taxi driver who repeated “it is true” in each example that citizens broadcast on a radio station that opened a signal to know the opinion of citizens, the majority of whom complained, while others expressed their fear of speculation.

Fight insecurity

Despite the concern about possible speculation, Cuyo sees it well that what is collected from the VAT is allocated to security.

“The security part is good, because crime, insecurity, was advancing more. I’m glad that part, that he (Noboa) is doing.”he said, asserting that in that case “the VAT increase is good.”

He seemed resigned to the decision because “What can we do, right now? Nothing anymore, because telling one, two or three people not to upload is absurd. It’s already done, so it’s time to accommodate it within the person’s reach.”he pointed.

Lazo expressed his hope that the Government “manage (money) well and, in reality, let it be for security”in the country, where during the Easter holiday 17 people were murdered, twelve of them in armed attacks and five after being kidnapped, while the country is in a state of emergency.

In statements to EFE, Lazo acknowledged that in the park – which is on the entrance road to the tourist historic center of Quito – there is now a presence of police and military, but it is missing “At night it is a plague of thieves”he asserted.

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