Ecuador’s Constitutional Court approves presidential decree on tax reform

The Constitutional Court of Ecuador approved a law decree on a new tax reform this Friday, signed by President Guillermo Lasso on May 17th.

This occurred after Lasso had declared the constitutional procedure of the “cross death,” dissolving the National Assembly (Parliament) and calling for early general elections.

The Court indicated in a statement that unanimously, the full body issued a “favorable opinion” to the law decree.

This was due to there being no preliminary, manifest, or notorious incompatibilities with the Constitution, following a prior check of constitutionality.

With the Court’s endorsement, the new tax reform will come into effect, reducing the payment of Income Tax (IR) for individuals and popular businesses, aiming to ease the economy of families, especially the middle class.

The reform contemplates an increase in annual deductible expenses, up to US$15,294 depending on the number of family dependents.

It also establishes a 15 percent income tax rate for sports betting houses.

The Court also reviewed a second law decree signed by the president on May 23rd to attract investments by creating new free trade zones. However, this was rejected.

In this case, the plenum issued an “unfavorable opinion,” considering its provisions disrespect the Constitution.

These were the first two decrees signed by Lasso after applying the “cross death,” which allows him to govern by decree, subject to a favorable opinion from the Constitutional Court until his successor takes office and the new National Assembly is installed in November.

Lasso chose to use this tool due to a severe political crisis and major internal upheaval resulting from a political trial he was facing in Parliament, where the opposition was seeking his dismissal.

Under the “cross death,” the ruler asked the National Electoral Council to call for new early presidential and legislative elections, which will be held next August 20th.

Those elected will have to finish the mandates of Lasso and the dismissed assembly members until completing the respective periods, which in both cases end in May 2025.

For the full picture, see our Brazil Tax Reform: Complete Guide.