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Ecuadorian Revenue Climbs as Foreign Exchange Tax Fills Its Coffers

Article Summary:

When Ecuador raised its tax on foreign exchange from 2% to 5% in early 2012 the government held little hope for a significant windfall in revenue. To its surprise, the country saw tax gains to the tune of $230 million more than was estimated for the first six months of 2012.

Photo Credit: Ecuador Times

Original Article Text From El Comercio via Google Translate :

Tax on foreign exchange outflow and generates 10% of revenues

Neither in the most optimistic scenario the government may have suspected that the increase in tax on foreign exchange outflow (ISD) of 2 to 5% from this year, would generate $ 230 million more than he had planned for the first six months.

Such is the level of collection of this tax to the stated goal of $ 800 million for this year will surpass widely, especially knowing that there are still key dates (holidays and Christmas) in which companies and individuals make the most of their acquisitions. And if that were not enough, the ISD has become only one semester in the third tax that gives more fruit to the tax authority, overcoming the traditional first Special Consumption Tax (see graphic).

But this diagnosis is two-fold. For one thing, although for the Treasury means more resources, on the other, his argument that the increase in ISD was set to avoid the outflow of dollars from the economy has almost vanished. The head of the SRI, Carlos Marx Carrasco, when he defended the tax increase sentenced to the four winds that if this measure does not apply, there was a risk of reaching a monetary anemia then a recession.

“Last year left the country USD 30 000 million, USD 25 000 million in the private sector,” he noted. The figures show otherwise. Despite the decline in imports and remittances in the first half, the outflow of foreign exchange increased 54% more than what was initially projected. And that has complicated business. Martin Acosta, CEO Inalproces, firm producing export food and nutrition, says that this has complicated domestic producers.

“Buy supplies or machinery is more expensive now. I can not estimate an exact amount of how much I have to pay in these months, but for all domestic producers the current situation is more complicated, not only by the ISD but also issues such as the ATPDEA.

The tax on foreign exchange outflow is just over the tiger stripe “. Other entrepreneurs are more specific. Jose Orellana, executive director of the National Poultry Corporation of Ecuador, said that the pig and poultry sectors are consuming about 80% of feed in Ecuador and increased ISD has contributed to rising raw materials are purchased in the international market.

“Hopefully, these products are included in the list of exemptions.” In early June, the government identified a list of materials that are exempt from the ISD, provided they are intended for export. That, to Gabriela Lopez, microentrepreneur dedicated to textile sector is not sufficient, as it argues that the tax increase has affected them.

“With the increases we achieved less to buy. U.S. import products and Asia. The profit margin was reduced. ” In line regards the small businessman Nicholas Silva. “We import raw materials for our canning business. But since it is for export, we can not ask for exemption. So our product less competitive by the higher cost. ”

So Felipe Rivadeneira main FEDEXPOR says they are working with the private sector so that farmers can get a tax credit, so that when imported inputs related to the production process, not affected by this tariff increase and thus not perish competitive sector.

Additional data
Through Executive Order 1180, President Rafael Correa exempted from paying taxes to the outflow of foreign exchange on imported products intended for export turn. The Central Bank decided that transfers from the outside, through the financial system, go first to their accounts. With this, the Government will ensure an additional charge for these transactions ISD. Carlos Marx Carrasco, director of the Internal Revenue Service (IRS) ruled that it is planning to raise the tax on foreign exchange outflow of 5 to 8%. RATE

Link to Original Article:

From El Comercio

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