Ecuador's Noboa wins VAT hike as legislators hit impasse

FILE PHOTO: Ecuadorean President Daniel Noboa

By Alexandra Valencia

QUITO (Reuters) - Ecuadorean President Daniel Noboa snatched a legislative victory on Friday after his bid to raise value added tax (VAT) was able to proceed as lawmakers hit an impasse while trying to decide whether or not to allow the measure.

Noboa has argued that raising VAT - alongside other tax increases such as a levy on banks' profits in 2023 - will help finance his security offensive on criminal gangs he has designated as terrorists amid spiraling violence in the Andean country.

On Tuesday, a majority of 83 lawmakers in Ecuador's National Assembly voted against raising VAT to 15% from 12% until 2026, which was then to stay at 13% thereafter.

Noboa presented a so-called partial objection the same day to push for a permanent increase to 13% and provide a mechanism allowing the president to raise it to 15% when the country's economic needs demand it.

Under Ecuadorean law, legislators' inability to vote against Noboa's partial objection or approve the VAT measures it sought means that the legislation will go ahead anyway.

The government did not immediately comment.

Noboa eyed taking an extra $1.1 billion per year by hiking VAT to 15%, according to the bill debated by lawmakers earlier this week.

The president wants to use resources with his VAT hike to strengthen the military, police and intelligence services to combat organized crime.

(Reporting by Alexandra Valencia; Writing by Oliver Griffin; Editing by Sandra Maler)