Tax incentives and credit insurance favored exports

The export sector remained active, despite the crisis of the covid-19 pandemic. Between January and July 2020, Ecuador exported $ 11,113 million which, although they represent a drop of 14% compared to the figures for the same period in 2019, implies a surplus of $ 1,529 million in the trade balance.

Tax incentives and credit insurance favored exports

One of the factors that made it possible to maintain this dynamism was the entry into force of the Organic Law of Tax Simplicity and Progressivity, which established a tax incentive for companies that have access to Export Credit Insurance.

This is stated by representatives of this sector, as well as insurance companies in the country, although the latter maintains that in the country only 3% of exports are covered by Credit Insurance (around $ 410 million) and the risk that companies go bankrupt due to the lack of payments from buyers abroad is latent.

The export industry remains strong, according to Adrián Ordóñez, General Manager of the insurance company Coface, noting that, of the total claims (claims) of non-payment or default that the company has received so far this year, “only the 5% correspond to the Export Credit Insurance, and the rest is concentrated in the local market ”.

Felipe Ribadeneira, president of the Ecuadorian Federation of Exporters (Fedexpor) maintains that the balance has been positive for the country, “we seek a main objective that is not to export taxes. We are not talking about special concessions, but it is not good to export taxes and we have the presumptive foreign exchange tax on exports ”.

It explains that in the event that an exporter fails to collect within 180 days, the Internal Revenue Service (SRI) charges as presumptive; “So how do we ensure that this income, if not through the tax incentive by contracting deductible insurance for the payment of income tax, but which ensures that these currencies return to Ecuador.”

He reiterated that the ideal would have been to eliminate the presumptive tax on the outflow of foreign currency, but this mechanism solves the problem to some extent.

Regarding exports during the pandemic, he says that at first there was fear regarding liquidity and non-payment, but it was possible to place the product internationally, non-oil exports have grown, 80% focused on the agri-food sector.

“The future of the country is non-oil exports, we have to invest in the agro-industrial sector, make it more competitive, look for exportable agreements,” he points out.

According to Fedexpor, around 2,500 companies in the country could benefit from the Tax Incentive. Between January and July of this year, non-oil exports reached $ 8,397, that is, 76% of the total volume of Ecuadorian exports, which means that at this time private companies have the responsibility of guaranteeing the entry of foreign currency in as far as foreign trade is concerned. (I)