If the referendum passes, all public servants and elected officials in Ecuador will be barred from holding wealth in offshore accounts.
As Ecuador heads to the polls Sunday to elect a new president and National Assembly, deciding the fate of President Rafael Correa’s 10-year Citizens’ Revolution, the small South American country will also make history as the first nation in the world to vote in a referendum that, if passed, will bar public officials from hiding wealth in offshore tax havens.
The referendum question, announced by Correa last November, will ask voters: “Do you agree that, for those holding a popularly elected office or for public servants, there should be a prohibition on holding assets or capital, of any nature, in tax havens?”
If Ecuador’s nearly 13 million voters approve the referendum, all public servants and elected officials will have one year to bring offshore capital back to the country, or they will be removed from office for violating the policy aimed at combating tax havens and increasing accountability of public officials.
Foreign Minister Guillaume Long, who has championed together with Correa Ecuador’s fight to ramp up global regulations to stamp out tax havens, has described the referendum as one small part of the country’s larger campaign calling for coordinated international action.
In an open letter published in The Guardian Sunday, a coalition of progressive campaigners from the U.K. — home to many of the law firms that facilitate global tax dodging — described Ecuador’s referendum as “innovative” and expressed “hope that Ecuador’s leadership on this issue will inspire other governments to make bold moves too.”
The release last year the Panama Papers — a trove of millions of leaked documents from the Panamanian law firm Mossack Fonseca that implicated dozens of global political and economic elite in possible tax dodging — spurred Ecuador to take action on financial practices that siphon off much-needed resources from the world’s poorest countries.
Ecuador Elections 2017
The country launched an Ethics Pact Against Tax Havens that promotes a solidarity-based “ethical economy” that puts people before the financial interests of a few wealth elites and corporations. The pact aims to catapult debate on tax havens onto the international stage and spark a move toward regulation to eliminate the “immoral practice” of offshore tax dodging.
According to Oxfam, which is among the non-profit organizations that have endorsed Ecuador’s fight against tax havens, tax dodging by multinational corporations costs poor countries at least US$100 billion every year. The organization recently reported that the world’s eight richest men possess as much wealth as the poorest half of the world, underlining the need for global action on tax havens to as a way to combat inequality.
A clampdown on offshore havens and tax dodging could lift 32 million people out of poverty in Latin America alone, equivalent to the total population of people in poverty in Ecuador, Bolivia, Colombia, El Salvador, and Peru. In Ecuador, it is estimated that a staggering US$30 billion — one third of the country’s GDP — is stashed outside the country.
For Ecuador, which has spearheaded major poverty reduction in the past 10 years under Correa’s left-wing government, pursuing economic justice and wealth redistribution is a key motivation behind the fight to hold wealthy elites and corporations accountable to their fiscal responsibilities through stricter rules governing tax havens.
In addition to cutting extreme poverty nearly in half, slashing inequality and vastly expanding health and education spending, in the past 10 years under the Correa government Ecuador has also made strides in reigning in widespread tax evasion, increasing tax collection three-fold with more efficient systems. The Ethics Pact and referendum on public servants’ use of tax havens seeks to expand that effort to further combat inequality and fuel social programs.
But the future of the country’s campaign against tax havens isn’t the only question hanging in the balance as voters head to the polls Sunday. The South American nation is also at a crossroads between continuing the Citizens’ Revolution for another four years under presidential frontrunner and Correa’s former vice president, Lenin Moreno, and following a turn to the neoliberal right sweeping the region with a vote for one of Moreno’s conservative rivals.
Moreno’s closest rivals, conservative candidates Cynthia Viteri and Guillermo Lasso, have both proposed slashing taxes in the country where the corporate tax rate of 22 percent is already just over 7 percent lower than the average for the Americas.