On April 1 of this year, VAT rose from 12% to 15% and, with it, countless products increased their cost. Representatives of the Loja Chamber of Industries indicated that sales in the first 4 months will decrease and they hope to normalize in the last quarter of 2024.
Circumstances
Diego Lara León, president of the Chamber of Industries of Loja, pointed out that the increase in VAT, in the end, represents an increase in prices and that, in the short term, demand contracts and there is an effect for companies both in sales and planning.
In addition to this, there are logistical costs—which have often been ignored—but they are important to analyze; For example, the entire change of labels, accounting systems, among others, has a significant cost that is around USD 200 million on a national scale.
“If we make a comparison with 2016 —when VAT also increased for a year—, in the first 6 months there was a contraction: sales in the country fell, but at the end of the period it did not represent a decrease, due to its recovery. We believe that this 2024: April, May, June and July, trade will reduce; Although, we hope that it can be redeemed in the last quarter of 2024,” he said.
Figures
Regarding security, a fundamental part of economic activity, the president’s speech does not match the figures: thus, this year the budget for security is USD 200 million; while the amount collected from VAT at 15% will be USD 1.2 billion. “It is clearly specified that it will allow the improvement of the fiscal fund and compliance with the conditions set by international banks for more credits,” he stated.
For his part, Juan Carlos Valdivieso Burneo, vice president of the Chamber of Industries, noted that talking about consequences is a little premature, because the VAT increase has only been in effect for a few days; “We will appreciate this more clearly in the coming weeks, since we must observe the impact on the purchasing capacity of Ecuadorians.”
Undoubtedly, the percentage appears to be too low and claims that it will not affect some areas, but in the end it ends up harming all sectors, because the raw materials of agricultural products are not taxed, but the inputs are.
“Thus, most companies, like Cafrilosa, are trying, in a certain way, to absorb that percentage of VAT, with the aim of maintaining the acquired public; but on the other hand it ends up affecting the profitability of companies, and those resources that they stopped receiving will not allow them the capacity for reinvestment, modernization…”, he concluded. (YO)
Given
Cafrilosa will maintain the cost of its products.