The value added tax (VAT) in Ecuador will go from 12% to 13% after this Friday Congress failed to reach an agreement to definitively stop an increase proposed by the government to finance its fight against drug trafficking.

On Tuesday, the National Assembly had rejected an increase in VAT – permanently to 13% and temporarily to 15% – proposed by the president who later vetoed that decision of the Legislature.

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The government sent a new document in which it set an increase of 13% and warned that it could modify the rate to 15% according to the country’s economic needs.

The Legislative This Friday he needed 92 of the 137 assembly members to ratify his initial plan to maintain the VAT at 12%. However, the motion only It had 78 votes in favor, reported the National Assembly in your X social network account.

Congress, where the ruling party is a minority, also did not obtain the necessary votes to officially accept the presidential veto.

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In the absence of an agreement, Ecuadorian legislation establishes that the veto is considered accepted, with which the VAT will go from 12% to 13% once 30 days are up.

This tax is one of the largest sources of foreign currency for Ecuador and the 12% rate allowed a collection of about 8.4 billion dollars (8% of GDP) in 2023.

With an increase of 15%, the maximum limit set by Noboa, the Executive could raise an additional $1.3 billion.

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To finance the fight against twenty gangs linked to drug trafficking, the Assembly approved that the financial system contribute up to 25% of the profits obtained in 2023 and that the Capital Outflow Tax, now 3.5%, will be increase to a maximum of 5%.

The powerful Confederation of Indigenous Nationalities (Conaie), which participated in revolts that overthrew three rulers between 1997 and 2005, has opposed the increase, considering that it will affect the economy of the poorest.

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