IT is often the case that when policies challenge corporate interests, tensions appear.
This represents nothing less than a debate on the role of top earners in the societies in which we live.
The decision by President Rafael Correa to submit the draft Law on Wealth Redistribution to the National Assembly, on June 5, provoked immediate discontent among the richest sectors of Ecuadoran society.
What are the main grounds for this proposal? The backdrop is a striking figure the President forcefully reiterated in recent days: 2% of Ecuadoran families own 90% of big business in the country.
“Ownership concentration was revealed. This is bad, it is one of the sources of inequality in Ecuador and the world,” Correa told the press, clarifying that the tax is only “for large conglomerates that generate dynasties.”
For direct heirs - children, grandchildren, parents or grandparents - the new legislation provides for a marginal rate of up to 47.5% which applies only to the wealthiest 1%. This percentage is lower than the marginal rates of Japan -55% - and South Korea -50% - and just a bit higher than in France - 45% - and the United States and Britain - both at 40%.
One of the first representatives of the opposition to express their disagreement with this measure was none other than the banker and former presidential candidate, Guillermo Lasso, former economic adviser and ambassador-at-large of the neoliberal government of Lucio Gutiérrez.
Lasso condemned the new measure stating that, “the State (of Correa) seeks to finish off the Ecuadoran family.”
As shown, an exaggeration that does not correspond to what has occurred in other countries; were the Japanese, Korean, French, British or American family destroyed by the implementation of a similar tax policy to that which Correa is pushing for regarding inheritance?
According to Ecuadoran economic analyst Juan Carlos Jaramillo, “with a marginal rate of 47.5% heirs never lose majority shareholder control over the companies of their parents, thus it is wrong to argue that with this rate the intention is to put an end to family businesses.”
It was on the basis of this argument that the Ecuadoran President pressed ahead: he criticized the “lineage, the dynasty” of Lasso and other business representatives and spoke of an “anachronistic capitalism” led by these families.
Beyond the inheritance tax itself, what seems to be under discussion in Ecuador is to what extent the State can autonomously intervene in the economic arena.
It is an argument that is currently taking place across the rest of the countries home to post-neoliberal governments, particularly at a time of slower economic growth throughout the region, due to a fall in commodity prices, but, above all, a reduction in growth forecasts worldwide.
In short, the debate centers on sustaining - and expanding - the social programs implemented by these post-neoliberal governments, for which resources are required.
Lasso’s argument - not to raise taxes on the wealthiest, but rather reduce them - is in line with proposals from other opposition leaders in the region, such as Mauricio Macri in Argentina and Aécio Neves in Brazil, who have announced that, on becoming presidents, they would continue with these social policies, but under no circumstances upset business interests. Where would they get the money, you ask. Who knows.
Ecuador, at least, offers a realistic solution - similar to that implemented in certain European and Asian States - to continue with the social policy outlined in the National Plan for Good Living 2013-2017: that those who have more should contribute more, thus banking on redistribution guaranteed by the very Constitution of the country. The continental debate on this issue is only likely to intensify in the coming months.
