Ecuador Earthquake Update: Taxes To Be Hiked Temporarily To Fund Relief Work

Ecuador’s President Rafael Correa said Wednesday he was raising taxes to help reconstruction efforts in the aftermath of the earthquake that jolted the country over the weekend, causing at least 570 deaths and billions of dollars worth of damage. The economy of the South American country — a member of the Organization of Petroleum Exporting Countries — is highly dependent on oil, and was already suffering due to a prolonged fall in crude oil prices.

The measures announced by Correa in his televised speech included raising the sales tax from the current 12 percent to 14 percent for one year, and a one-time 0.9 percent tax on the wealth of those who have more than $1 million in assets. Another measure mandates people earning more than $1,000 a month to contribute one day’s salary toward reconstruction work, those who earn more than $2,000 would contribute two days’ salary, and so on up to five days’ salary to be paid by those earning more than $5,000 a month.

“Society is built with institutionalized commitment, with organized collective action,” Correa said. “This is how a modern society responds to this kind of disaster and the way each Ecuadorian, within his ability, contributes to the recovery of his own motherland.”

The president also said taxes on companies would be increased, and he announced the sale of some state assets as well, though he didn’t specify what they would be. The country will also draw $600 million in emergency funding from World Bank and other lenders.

“Rebuilding the affected areas will take years and cost millions of dollars,” he said, adding: “The short term costs are significant.”