New Law on Tax Havens in Ecuador
1. Background
The Organic Law for the Application of the Popular Consultation Held on February 19, 2017 — the Tax Havens Law — was published in Official Register Supplement No. 75 on September 8, 2017.
The purpose of this Law is to establish that, in order to hold an elected public office or to be a public servant, a person may not hold assets or capital of any nature in territories considered tax havens. If they do, they must cease to hold them within a maximum period of one year, counted from the date of publication of the results of the popular consultation.
This Law is the result of the popular consultation held on February 19, 2017, in which Ecuador voted in favor of the measure, according to the results published on March 6, 2017. Therefore, the National Assembly fulfilled its legal duty to implement the sovereign will expressed by the people.
2. Scope
Article 1 provides that this Law shall apply to persons who:
Hold an elected public office;
Are considered public servants;
Are candidates or are running for an elected public office; and
Aspire to enter public service.
However, Article 2 of the same Law establishes the following exceptions:
Foreign service officials whose mission is carried out in a country or jurisdiction considered a tax haven;
Persons who wish to run for elected office and/or public officials who are students or scholarship holders in countries or jurisdictions considered tax havens; and
Candidates for the National Assembly representing overseas constituencies, whose residence is in a country or jurisdiction considered a tax haven.
3. Exception
No sanctions shall apply to public servants who hold investments in health insurance and retirement plans granted by companies that may have capital in tax havens.
4. List of Tax Havens
The Internal Revenue Service — SRI — is empowered to determine a specific list of jurisdictions and regimes that shall be considered tax havens, pursuant to Article 3.
Likewise, the SRI is authorized to add tax havens to the list. In such cases, for the application of this Law to the persons mentioned in Article 1, they shall be granted a period of one year to comply with the relevant provisions, pursuant to Article 6.
The Office of the Comptroller General of the State — CGE — shall be responsible for monitoring compliance and may request information from any public or private entity within the national financial sector regarding transfers, movements, or transactions of the persons required to declare, pursuant to Article 5.
5. Disqualifications and Sanctions
In the event of non-compliance with this Law, applicants shall be disqualified from becoming candidates or holding public office, pursuant to Article 7.
Those who fail to comply with this Law shall be sanctioned with removal from office or loss of position, pursuant to Article 8.
The procedure to be followed by the CGE is as follows:
a) The corresponding special examination shall be ordered in order to determine the existence of the violation and the liability of the public servant under examination;
b) Within a period of three days, the public servant shall be notified of the commencement of the special examination;
c) Within a period of 60 days, the public servant shall submit exculpatory evidence;
d) Within a period of five days, the CGE shall order either the dismissal of the proceeding or the removal of the public servant from office; and
e) Within a period of three days, the CGE shall notify the public servant and the appointing authority of the decision.
In the case of elected public servants, public servants subject to political oversight, Justices of the Constitutional Court, and Justices of the National Court of Justice, the CGE shall send the case file containing the removal decision to the Constitutional Court, so that within a period of 10 days it may rule on compliance with due process.
In its decision, the Constitutional Court shall confirm or reject the resolution, pursuant to Article 9.
6. Sanctioning Procedure for the President and Assembly Members
Once the Constitutional Court has issued its ruling, there are two possible paths:
In the case of elected public servants belonging to collegiate bodies other than the National Assembly, the Constitutional Court’s decision shall be sent to that collegiate body so that it may enforce the decision within a period of 10 days; and
In the case of the President of the Republic, the Vice President of the Republic, and members of the National Assembly, the confirmatory decision of the Constitutional Court shall serve as the basis for the Plenary of the National Assembly to adopt the corresponding decision in accordance with the law.