Ecuador poised to bar politicians from stashing assets in tax havens

The people of the South American country of Ecuador appear to have voted in favour of banning their political leaders from being allowed to keep assets, companies or capital in tax havens.

Although the ballots in a referendum on the matter were still being counted early on Tuesday morning, Ecuador time, the “yes” vote is currently ahead, according to press reports, including a posting on the website of the New Internationalist, a UK-based online blog and magazine.

The question asked of Ecuadorans was: “Do you agree that, for those holding a popularly-elected office, or for public servants, there should be a prohibition on the holding of assets or capital, of any kind, in tax havens?”

Sunday’s referendum is said to have been the first of its kind, but it has already sparked commentary among those who have heard of it that it might be adopted elsewhere. “What,” one UK tax expert said in an aside to International Investment, “do you think would happen if the Ecuadorean approach were adopted in the UK?”

Presidential election 

The little-noticed referendum on whether Ecuadorean politicians should be allowed to keep their personal assets abroad took place at the same time as a presidential election, the winner of which also has yet to emerge. The latest reports out of Ecuador suggest that the leftist, governing party candidate Lenin Moreno will be chosen, but they noted that it could be days before it’s known whether he will face a runoff against the other leading candidate, a former banker named Guillermo Lasso, in April. Eight candidates’ names were on the ballot.

With 88% of the votes counted, Moreno was reported by the BBC to have 39.1%,  just short of the 40% needed to win outright in the first round.

Ecuadoreans are said to be unhappy about the way the country has been run recently, due to economic troubles and corruption scandals, which have also been a recent feature elsewhere in South America.

According to the New Internationalist, with 44% of the votes counted, 54% of the nation’s electorate had voted in favour of banning politicians being allowed to make use of  tax havens.

It quoted Ecuador’s foreign affairs minister, Guillaume Long, as saying in an exclusive interview with the publication, that the proposed regulation banning the use of overseas facilities for stashing assets was “a very ambitious, radical, and exemplary” one.

“He explained that now ‘civil servants will have one year to bring all their assets back to Ecuador, and if they don’t comply with this within one year, they will have to step down – including [the] president and vice-president’,” the New Internationalist quoted Long as saying.

“This will be enshrined in electoral law.’

Long went on to explain that the aims of the referendum were to increase transparency and increase tax revenue for development, while also cracking down on corruption and bringing down inequality, the publication said.

Located on the west coast of South America, above Peru and below and to the west of Colombia, Ecuador has a population of around 16 million, and a nominal GDP per capita of just US$6,196, making it 83rd on the International Monetary Fund’s 2015 list.

Thus far, Ecuador appears not to be on the list of more than 100 countries that have signed up to the OECD’s so-called Common Reporting Standard scheme, for automatically exchanging tax- relevant financial information.

Some published reports have quoted those in favour of the referendum banning Ecuadorean politicians from using tax havens as saying as much as US$30bn could currently be held in overseas financial institutions, on behalf of wealthy Ecuadorans.

ABOUT THE AUTHOR
Helen Burggraf
Helen Burggraf is the editor of International Investment. A US-trained journalist, she has worked in Rome, New York City and London, covering everything from the fashion and retailing industries to the global drinking water and water-treatment sector, private equity, and most recently, the international cross-border financial services/advice industry.

Read more from Helen Burggraf

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