Ecuador’s President Daniel Noboa achieved a legislative win on Friday as his proposal to increase the value-added tax (VAT) moved forward after lawmakers reached a stalemate on deciding whether to allow the measure or not.
Noboa has argued that raising VAT, in addition to other tax hikes such as a levy on banks’ profits in 2023, will help fund his security efforts against criminal gangs that he has labeled as terrorists amid escalating violence in the Andean country.
A majority of 83 legislators in Ecuador’s National Assembly voted against the increase of VAT to 15% from 12% until 2026, which would then remain at 13% thereafter.
On the same day, Noboa presented a partial objection to push for a permanent increase to 13% and create a mechanism allowing the president to raise it to 15% when the country’s economic needs require it.
Under Ecuadorean law, if legislators are unable to vote against Noboa’s partial objection or approve the VAT measures it sought, the legislation will proceed anyway.
The government did not provide immediate comments on the situation.
According to the bill debated by lawmakers earlier this week, Noboa aimed to generate an additional $1.1 billion per year by raising VAT to 15%.
The president intends to use the resources from the VAT hike to bolster the military, police, and intelligence services in the fight against organized crime.
(Reporting by Alexandra Valencia; Writing by Oliver Griffin; Editing by Sandra Maler)
