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Ecuadorians Get a Taste of Marx with 75% “Surplus Value” Tax

By: PanAm Post Staff - Jun 10, 2015, 12:45 pm

EspañolEcuadorian President Rafael Correa appears to have spotted a potential source of revenue in the real estate market. On Monday, June 8, he proposed a new tax that would allow the government to keep 75 percent of “windfall profits” coming from property sales.

Correa has recently been facing criticism from middle class an business sectors after unveiling plans for new taxes. (Presidency of Ecuador)
Correa has recently been facing criticism from middle class an business sectors after unveiling plans for new taxes. (Presidency of Ecuador)

Correa, who has recently introduced a controversial inheritance tax, aims to tax profits exceeding US$8,496 on the “surplus value” of real estate transactions — a figure arrived at by government calculations.

After subtracting the original purchasing price from the selling price, and factoring in further arithmetic with interest rates, the government will keep 75 percent of profits exceeding 24 times the monthly minimum wage of $354.


“No matter how the government tries to paint it, the surplus value tax has neither heads nor tail. All prices are regulated by the market.”

Two thirds of the revenue will be allocated to Ecuador’s autonomous regional governments, while the remaining third would go to the federal government budget.

President Correa said on Sunday night that this tax is based on the notion that “any added value that does not stem from the owners’ direct action is an illegitimate earning.” He explained that with the new tax the government hopes to target real estate “speculators.”

As an example, Correa cited the example of land nearby the new Union of South American Nations (Unasur) headquarters in Quito, whose value has increased six-fold. This is a typical result when expenses are socialized and earnings privatized, he said.

However, the bill exempts individuals or companies whose principal economic activity lies within the real estate sector.

Correa has dispatched the new tax to Congress just a week after proposing a bill that would impose an inheritance of 77 percent on the largest bracket of legacies and donations, angering sectors of Ecuadorian society.

On Monday, some 1,000 demonstrators streamed into the streets of Quito, Ecuador’s capital, as rival protests simultaneously celebrated and rejected the inheritance tax.

Source: El Universo,