Cash-Strapped Correa Unveils Death Tax
EspañolEcuadorian President Rafael Correa has unveiled the details of a new inheritance tax he plans to send to the Congress soon.
The bill “aims to prevent the same families from staying in power” through “the intergenerational transmission of wealth,” Correa explained on May 30 during his usual Saturday-morning broadcast.
“This targets the wealthiest, as a redistributive measure, and does not affect the middle class and the needy. They should not be afraid,” the president previously stated on Friday.
Correa explained the bill will set progressive tax rates on individual estates over US$35,400, starting at 2.5 percent. For inheritances of more than $849,500, the new tax is set to 77.5 percent.
The president, however, says the new tax rules may be difficult to enforce, given the loopholes that exist to avoid paying: “An interesting thing we found is that the rich don’t die anymore; they don’t inherit anything. They don’t get anything, because they cheat; they resort to tax havens such as the Cayman Islands, Bahamas, and they sign an undated trust.”
Rafael Oyarte, a tax-law specialist, says the updated inheritance tax will discourage new investments. “They don’t want people to own their legitimate wealth, and [with this tax] no one will want to start a new business. No one wants to work to have the fruits of their labor not go to their kids,” Oyarte told Ecuadorian daily La Hora.
Oyarte stressed that this tax will force people to think twice about buying property or a home, since it could mean leaving their children with a heavy tax burden.
Sources: El Tiempo.