JUNE 24, 2015
Ecuador: Will Correa Resurrect His Tax Plan?
Ecuadorean President Rafael Correa recently announced that he was temporarily halting a plan to boost inheritance and capital-gains taxes. The announcement followed large street protests in opposition to the tax hikes. Will the plans eventually go forward, or will they be permanently shelved? What would be the economic effects of such tax increases? Is Correa facing mounting levels of political and public opposition to his agenda?
Abelardo Pachano, president of Finanview in Ecuador, former CEO of Produbanco and former Ecuadorean central bank president: "Some government officials have cited a recently published book by economist Thomas Piketty as support for actions that governments must take to avoid the huge inequality that prevails in economies today. Piketty’s book advances the notion of putting a global tax on capital, and the inheritance tax is a way to put a tax on the stock of capital of individuals. But it does not make sense for small, developing country with a free-market economy like Ecuador to be the pioneer on this idea. It would produce a big outflow of capital, and it violates property rights and the rule of law. Moreover, proposing these taxes was done at a very bad time, considering Ecuador’s economy has suffered a big external shock due to the fall of oil prices. The tax proposal would increase de-monetization at a time when the financial system is suffering from ..." MORE
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