Ecuador lawmakers approve ‘historic’ tax haven law

Ecuador’s National Assembly has approved what some have called a historic law that seeks to prohibit elected officials and other public servants in the country from being allowed to keep their personal assets, including companies and capital, in overseas tax havens.

The vote, which has received little publicity thus far outside of South America, came on Friday, according to local press reports, including those of Telesur, the state-funded, pan-Latin American television network.

The law was approved “with 107 votes in favor and 18 abstentions, including votes of the right-wing opposition, and SUMA, the political party of Quito Mayor Mauricio Rodas”, Telesur said, in a report on its news website, Telesurtv.net.

The reports didn’t say when the legislation might come into force, or provide other key details, such as how it would be enforced, how jurisdictions would be determined to be “tax havens”, or what penalties might be brought to bear against those found to be in violation.

‘Increase public officials’ accountability’

The anti-tax haven law had been proposed by the leftist government of Ecuador’s former president, Rafael Correa, which saw it as a way of increasing the accountability of public officials.

As reported, Ecuador’s voters expressed support for the proposed law in a referendum held on 19 February, by a vote of 55.12% to  44.88%.

The referendum on whether politicians should be allowed to keep assets in tax havens was said to have been the first of its kind, although it prompted calls by tax justice campaigners to follow suit in other countries.

Ahead of the vote, for example, fifteen people signed a letter to London’s Guardian newspaper which appeared beneath the headline, “Let’s follow Ecuador in holding a referendum on tax havens”.

Commenting on the proposed legislation in the wake of the referendum vote in favour of it, Alex Cobham, chief executive of Tax Justice Network, a UK-based organisation that campaigns against tax avoidance and the use of tax havens, noted that the symbolically-important measure would “only become useful if the list of secrecy jurisdictions, or ‘tax havens’, [used to determine which jurisdictions would be considered permissible] is a meaningful one”.

“Historically, these lists have been highly political, and have tended to feature small islands, and not such big players as the United States,” Cobham added.

It’s not known what prompted the idea for a law banning Ecuador’s politicians from stashing undeclared assets outside of the country, but it’s thought that last year’s so-called Panama Papers scandal, involving the organised publication of data contained in more than eleven million documents that were leaked from a Panamanian law firm, Mossack Fonseca, was probably a factor. As the map above shows, Ecuador isn’t far from Panama.

Also, like many Latin American countries at the moment, much of the population is enduring hard times now that the recent commodities boom has come to an end. The International Monetary Fund has forecast the Ecuadorean economy will shrink by 2.7% this year.

Ecuadoreans are also 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.

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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