Ecuador’s Noboa seeks tax hike to fund security

QUITO – The administration of Ecuadorean President Daniel Noboa has asked lawmakers to weigh an increase in value added tax (VAT) to finance efforts to combat crime gangs, as the armed forces increased operations in violent areas on Friday.

A dramatic spike in violence this week – including the on-air storming of a TV station, the hostage-taking of 178 prison staff by inmates and the kidnapping of police officers – appears to be a response by gangs to Noboa’s plans to tackle a dire security situation.

Noboa, who took office in November, has declared a state of emergency and named 22 gangs as terrorist organizations.

Three hostages have been freed, prisons agency SNAI said late on Thursday, with help from the Catholic Church and the Red Cross. Another 21 being held in the prison in Cuenca were attended to by the Red Cross, it added.

The government has said that operations are ongoing to free the hostages being held in at least seven prisons, but there has been scant information about their status, leading to criticism by their families and union.

Security has worsened in tandem with serious economic troubles, as the country grapples with domestic liquidity problems, limited options for foreign financing and tens of billions in external debt.

Noboa’s tax proposal, sent to the national assembly late on Thursday, would raise VAT by three points to 15%. The bill is classed as urgent and must be approved within 30 days.

Lawmakers – in a rare show of unity – have already approved two urgent proposals from Noboa’s government, another tax bill meant to increase youth employment and a law designed to attract investment in the electricity sector.

“The current security crisis in Ecuador underlines the urgency to increase potential tax collection for the state,” Noboa said in a document shared with the assembly. “Increasing VAT will give the state a constant source of income.”

The measure could raise more than $1.3 billion per year and would come into force in March.

Funds would go to finance weapons and equipment for security forces and improvements to the prison system, as well as the payments owed to regional governments, the document said.

Ecuador closed 2023 with a fiscal deficit of more than $5.7 billion, according to the government. Its foreign debt totals more than $47 billion.

The military on social media said it has intensified operations in several provinces, arresting gang members and seizing weapons.

The attorney general’s office said three people were being held on charges of plotting an attack on the head of the national police, without providing further details. The police made no comment on the issue.

Noboa’s government blames the deteriorating security situation on an increase in drug trafficking through Ecuador, which borders cocaine-producing Colombia and Peru and has become a major drug shipment point.

Noboa on Thursday presented details of two new high-security prisons he has pledged to build to hold top gang leaders.

The country will ask people entering the country across its borders with Peru and Colombia to show their criminals records during the duration of the state of emergency, the government said late on Thursday. REUTERS

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