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  • President Rafael Correa speaks from the Presidential Palace in Quito.

    President Rafael Correa speaks from the Presidential Palace in Quito. | Photo: @Presidencia_Ec

"The country is going through its worse tragedy in the past 67 years, the Ecuadorean president said.

After visiting the affected areas after the earthquake for four days, President Rafael Correa said that the necessary massive reconstruction efforts will require five new tax measures in order to fund them - as allowed by the Constitution in a State of Exception.

"We have experienced the greatest tragedy in the last 67 years," said Correa, adding that reconstruction will take years and cost billions of dollars.

 

 

 

His government will soon introduce the following measures to the country's National Assembly:

1. Ecuadoreans will be taxed one day of salary if they earn up to a thousand dollars per month for one month, they will be taxed two days when they earn two thousand dollars per month, and so one - up to five months, on the principle of progressive taxation.

2. Sales tax will be raised by 2 points for one year, meaning from 12 percent to 14 percent.

3. Anyone who earns more than US$1 million will be taxed one time 0.9 percent per person.

4. A 3 percent tax will be imposed on company profits.

5. Some of the assets resulting from the recent public investment will be sold.

"The pain of one, is the pain of everyone," he concluded, praising the collective effort made so far by individuals, state agencies, international organizations, and the private sector.

According to initial estimates, 90 percent of Jama and 95 percent of Canoa have been destroyed, reported teleSUR's correspondent Lucho Granadas Cejas.

"Canoa, for example, lives mostly from tourism, and the damage will mean a drop of visitors, so residents will require immense help from the government," Granadas Cejas said. In the province of Manabi, authorities estimate that 8,000 stores out of 18,000 have bee destroyed.

Minister of Economic Coordination, Patricio Rivera, clarified some of the measures announced last night in a press conference: "The solidarity contribution of 0,9 percent for fortunes over US$1 million will be applied once only, and will not apply to citizens directly affected by the earthquake on the coast." As for the progressive tax on salary, an Ecuadorean worker earning US$1,000 will contribute a one time amount of US$33.

In addition, about 14,000 families affected by the earthquake will be entitled to apply for financial compensation for material damages, after evaluation by the Bank of the Social Security Institute.

Minister of Production Vinicio Alvarado also emphasized that all medicines, and 90 percent of food products, are not taxed, and will therefore be excluded from the exceptional measure of a 2 point raise for one year.

The measures should help raise between US$650,000 and US$1 billion, still far from the estimated US$3 billion damages.

Ecuador has access to 600 million in lines of credit from various regional organizations, but the recovery costs are estimated to reach about 3 percent of GDP, approximately US$3 billion.

Taxes on income and profits accounts for just 4.1 percent of Ecuador's GDP, compared to an average of 11.4 percent in OECD nations.

 

Moreover, despite the tax raise, Ecuador's rates will remain lower that many countries in Latin American.

Ecuador will raise its taxes from 12 percent to 14 percent for one year.

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