Ecuadorean President Lasso Enforces IMF-Style Tax Reform

On Monday, Ecuador’s President Guillermo Lasso mandated into law a controversial tax reform bill aimed at raising US$1.9 billion over the next two years.

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"The bill takes effect by mandate of the Constitution," the Presidency's Communication Secretariat said in a statement, adding that enacting the law "means building a new path towards the country's recovery and generating jobs."

The bill was submitted to the Congress on Oct. 28, giving lawmakers a 30-day period ending on Sunday to pass or amend it. However, the legislature, where the opposition holds a majority, failed to approve the bill.

The Economy Ministry vows the new law will not affect 96.6 percent of the economically active population as tax increases would only be directed at citizens earning over US$5,000 a month. The details of the new regulations, however, depict another image.

Six months ago, after becoming president swearing that he would not increase taxes, Lasso agreed with the International Monetary Fund (IMF) to implement a policy package supposedly aimed at reactivating the Ecuadorean economy. Among those policies, for example, are increases in tax revenues, reductions of deductions for expenses in personal tax returns, increases in fuel price, and the privatization of public companies.

While the Christian Social party denounced that the Lasso administration has dealt a very hard blow to the majority of the population, the Union for Hope (UNES) assures the new law is unconstitutional.

For the Ecuadorian president, however, the approval of his fiscal adjustment proposal is a political victory. Now Lasso is preparing bills to modify labor rights and investment regulations, two issues that will be more controversial and sensitive.