The National Assembly of Ecuador filed this Wednesday, with 84 votes in favor, the draft Organic Law for the Improvement of Collections through the Fight against Money Launderingwhich had been presented by the President of the Republic, Daniel Noboaas urgent in economic matters. The legislative rejection, according to the assembly members, was due to the fact that the bill sought to increase the tax burden for citizens.
The project proposed a series of measures to combat the crime of money laundering, including reforms to the tax system and the regulation of economic activities considered high risk, such as the purchase and sale of used vehicles. Among its provisions highlighted the application of progressive taxes based on the value of vehiclesthe prohibition of cash payments in these transactions and the obligation to register with the Financial and Economic Analysis Unit (UAFE) for those who sell used automobiles.
Despite the Executive’s justifications, which highlighted the need to strengthen the fight against money laundering as a pillar to weaken the finances of organized crime, legislators considered the project’s approach to be inadequate. During the first debate, held on November 27, several assembly members pointed out that the initiative did not offer concrete solutions to the problem of money laundering and, instead, proposed measures that would directly affect low- and middle-income sectors.
The legislator Jorge Penafielfrom the Construye bench (the party that promoted the murdered Fernando Villaviceciopresented the motion to deny and archive the project. Peñafiel stated that this project was “an immediate rearrangement of resources without adequate technical planning”. In his speech, he emphasized that the tax impact of the law would be detrimental to the most vulnerable Ecuadorians: “Let the message be clear: no more taxes for poor people”.
The president of the Assembly, Viviana Velozbelonging to Correismo, pointed out that: “This Assembly is always ready to support families, but will not allow one more tax to be charged to the working and working class (…) This Assembly will not vote for new taxes to be imposed,” according to Veloz.
The report of the first debate of the project, prepared by the Specialized Commission on the Economic and Tax Regime, highlighted several deficiencies in the proposal. Although he recognized the urgency of combating money laundering, he emphasized that any regulations in this area must be accompanied by an institutional and budgetary strengthening of the UAFE, as well as a more robust technical framework.
The report also noted that the implementation of taxes on activities such as the purchase and sale of used vehicles could generate greater informality and discourage the regularization of such transactions. Legislators argued that, instead of raising more resources, these measures could have the opposite effect by encouraging operations to be carried out outside the regulatory framework.
Ecuador has become a money laundering center. According to a study by the Ecuadorian Observatory of Organized Crime (OECO), the money laundering It is the second expression of organized crime in Ecuador, only surpassed by drug trafficking. Money laundering is understood as the process that allows assets of illicit origin to be integrated into the legal economic system, appearing to have been obtained legally.
Regarding money laundering, the OECS indicates that this crime It focuses on economic activities related to construction, purchase and sale of real estate and vehicles, pharmacies, restaurants, gas stations and online betting centers. A study by the National Police also indicated that the dollarization and the baja banking facilitates the transaction of illicit activities and money laundering.
