QUITO (Reuters) – Ecuador's parliament on Tuesday rejected the president's proposal to increase the value added tax (VAT). Daniel Novoa It said it would fund security attacks against criminal organizations.
Lawmakers voted against increasing value-added tax from 12% to 15% until 2026, and against leaving it at 13% after that year.
The bill failed by a margin of 83 to 43, with nine abstentions.
Lawmakers approved a one-time measure to tax bank profits by 5% to 25% starting in 2023. Ecuadorian banks currently pay no taxes on their profits.
According to the bill debated by MPs, the government expected to raise about $1.1 billion a year by increasing value-added tax to 15%.
The bill is expected to raise $145.9 million from a one-time tax on bank profits, it added.
Ecuador has long been a haven for expatriate retirees, but violence has spread across the country since the coronavirus pandemic devastated South America's economy.
Last month, gunmen attacked a live TV station, shot a presidential candidate as he walked out of a rally during last year's election, and killed hundreds of inmates in a prison riot.
The rise in crime has led some fearful civilians to learn how to use handguns to protect themselves and demand that authorities do more to restore law and order.
The vote was an important step for Novoa, who had received support from lawmakers for an electricity bill aimed at increasing power generation and attracting foreign investment, as well as a separate tax bill to encourage youth employment. This will be a setback.
The government did not respond to requests for comment.
(Reporting by Alexandra Valencia; Writing by Oliver Griffin; Editing by David Gregorio)
