Ecuador's National Assembly Opens Debate on $1.4bn Tax Reform Package

Ecuador's National Assembly Opens Debate on $1.4bn Tax Reform Package

Ecuador's National Assembly convened on Monday to begin formal debate on the government's Ley de Eficiencia Tributaria, a comprehensive tax reform package projected to generate $1.4 billion in additional annual revenue -- equivalent to approximately 1.2% of GDP.

The legislation, submitted by the executive branch in December, is a key condition of the country's $3 billion IMF Extended Fund Facility programme and has been designated as "economically urgent," giving the Assembly 30 days to vote or see it enter into force by default.

Key provisions

The reform package contains several contentious measures:

• Digital services tax: A 3% levy on gross revenues of foreign technology platforms (Netflix, Spotify, Uber, Amazon) operating in Ecuador, projected to raise $180 million annually
• VAT base expansion: Elimination of exemptions on processed foods, private education above $500/month, and private healthcare premiums, expected to yield $620 million
• Corporate minimum tax: A 15% global minimum tax aligned with OECD Pillar Two, affecting approximately 340 multinational subsidiaries
• Wealth disclosure regime: Mandatory reporting of offshore assets exceeding $100,000, with penalties of up to 25% for non-compliance

"This is not about raising taxes for the sake of it -- it is about modernising our revenue base and closing loopholes that cost the state hundreds of millions," said Finance Minister Roberto Luque during a press conference.

Political headwinds

The bill faces significant opposition from the business lobby. The Comite Empresarial Ecuatoriano (CEE) has warned that VAT base expansion will disproportionately affect middle-class households and could dampen consumer spending. The CEE estimates the effective tax burden on formal-sector businesses would rise from 32% to 36% of profits.

Opposition bloc Revolucion Ciudadana, which holds 48 of 137 Assembly seats, has indicated it will oppose the corporate minimum tax provision while potentially supporting the digital services levy.

A final vote is expected by February 28. Markets are pricing in passage; failure would likely trigger a 200-300 bps widening in Ecuador's sovereign spread, according to Citi's Latin America economics team.