Ecuador - Politics, government, and taxation

Ecuador is a unitary republic that consists of 3 governmental branches: the executive, legislative, and judiciary. Presidents and congressional representatives are elected by popular but compulsory vote, while members of the independent judiciary branch are appointed. Still in the early stages of democracy, Ecuador has not seen the consolidation of political parties. Instead, there is a multitude of parties whose popularity wavers from election to election, sometimes based on the performance of individual politicians. The leading parties to have emerged from the 2000 congressional election are the Social Christian Party (SCP, center-right), the Popular Democratic Party (PDP, center-left), the Democratic Left (DL, center-left) and the newly founded Pachakutik-New Country Party (P-NC, populist-left). All parties support government-funded social programs, but they have dissenting opinions about privatization and the economic role of the state. The SCP supports economic liberalization and the privatization of state-owned entities such as water, electricity, and the postal service. The PDP and DL support a broader economic role for the state and, therefore, advocate price subsidies and continued state ownership of most utilities. The P-NC is the most liberal of the 4 parties, favoring tax, welfare, and social policies that would benefit the most Ecuadorians rather than the elite.

Ecuador's economic reforms of 2000 established the U.S. dollar (US$) as the official monetary unit and diminished the role of the Ecuadorian government in the economy. Before reform, the state had played an important role in economic affairs, holding a large payroll, providing price subsidies on gasoline, and cooking gas, maintaining ownership of telecommunications, and the production and distribution of electricity. The reform agenda cleared the way for structural adjustments to reduce the number of state employees, auction off utility companies to private enterprise, and adjust the price of gas and other commodities to international levels. The role of the Ecuadorian government in the economy will be much smaller if these reform measures are carried out.

There are several different types of taxes in Ecuador, including value-added tax , personal income tax , a consumption tax on domestic fuel, and a financial transactions tax. These taxes were adjusted when the liberalization program was adopted, shifting the bulk of taxpayer responsibility to individual Ecuadorians through higher personal income tax. These measures were taken to lower the financial transactions tax and encourage foreign and domestic investment. Tax policies, like most other economic policies in Ecuador, are designed by the executive branch of government and carried out by the legislature.