New revenue measures include VAT adjustments, tighter refund controls, mining changes and limits on tax-credit payments.

Ecuador’s government is moving ahead with a series of tax and revenue measures designed to raise about $1.5 billion in 2026, as part of its commitments under a $5 billion credit program with the International Monetary Fund.

The measures do not amount to a broad tax reform like the politically difficult increase in the VAT rate approved in 2024. Instead, the government is relying on a more targeted strategy: narrowing tax exemptions, expanding the range of products subject to VAT, strengthening withholding rules, limiting the use of tax credits, and collecting more from mining and investment contracts.

The plan is part of the agreement that allowed Ecuador to pass the fifth review of its IMF program on April 22nd, 2026. That approval opened the door to a $394 million disbursement, while four additional reviews remain before 2028. If Ecuador meets the remaining targets, the country could receive another $1.276 billion.

A revenue target without a new tax reform

The government has committed to increasing state revenue by about 1.2% of gross domestic product this year, equal to roughly $1.5 billion. Of that amount, around $1.043 billion is expected to come from additional tax collection.

Economist Jorge Calderón said the target is ambitious because the government is trying to raise revenue without asking the National Assembly to approve another major tax-rate increase.

“Implementing tax reform is not a popular measure, especially with local elections approaching,” Calderón said.

Instead, he said, the administration is choosing measures that are less visible to the public but can still improve collections. These include reducing exemptions, clarifying which products are taxed, and increasing controls on taxpayers.

That approach is also meant to help Ecuador reduce its reliance on multilateral loans. Under the IMF program, the government must meet both quantitative and qualitative goals. The quantitative goals focus mostly on increasing revenue and controlling spending, while the qualitative goals include audits, laws, and administrative reforms.

Food items lose 0% VAT status

One of the most visible changes this year has been the decision by the Internal Revenue Service to clarify that 60 food items should no longer receive 0% VAT treatment and must instead be taxed at 15%.

The change was issued through a March 26th circular. Among the products listed were lactose-free milk, fortified milk, precooked noodles, canned onions, fruit pulp and other processed or specialized food products.

According to the IMF report, Ecuador has already taken steps to “delimit” which goods and services are subject to VAT, including some products consumed mainly by higher-income households. The government prepared the list with technical support from the World Bank.

The measure does not raise the VAT rate itself, but it changes the tax treatment of selected products. In practice, that means some items that had been sold without VAT are now subject to the 15% tax.

For consumers, the impact will depend on how much of the additional tax is passed on at checkout. For the government, the change is part of a broader effort to reduce what officials call tax expenditure — exemptions, exclusions and benefits that lower public revenue.

Withholding rules also tightened

The government has also moved to strengthen income tax advance payments and withholding mechanisms.

On February 27th, the Internal Revenue Service issued a resolution increasing withholding percentages for several types of income. One example is the withholding tax on earnings from savings policies of less than three months, which rose from 2% to 3%.

While such changes are technical, they can improve government cash flow by collecting more revenue earlier, instead of waiting until taxpayers file annual returns.

Calderón said the pressure to raise revenue has grown because Ecuador is also facing higher fuel-subsidy costs. Since the war in the Middle East began, international fuel prices have increased, making imported fuel more expensive for the country.

That has placed additional strain on public finances, particularly because Ecuador continues to subsidize some fuel prices for consumers.

Refunds and credit notes come under scrutiny

The IMF report also points to coming controls on VAT refunds, though it does not specify which refunds will be affected or what new procedures will be applied.

In Ecuador, VAT refunds are available to several groups, including senior citizens, people with disabilities and exporters. But delays have become a recurring complaint, especially among seniors who depend on those reimbursements.

One senior citizen, Elsa Zurita, said she is still waiting for refunds from September through November 2025, even though the process was approved.

“Last year we completed the process for those months, and it was approved, but I haven’t received the deposit yet,” she said.

The Internal Revenue Service said it made more than $455 million in payments tied to more than 4.8 million resolutions but did not provide details on delayed amounts.

Another upcoming change will affect taxpayers who use credit notes to pay tax obligations. When taxpayers have balances in their favor, the tax authority often returns those balances through credit notes rather than cash. Many taxpayers accept them because cash refunds can take a long time.

But under a new resolution, taxpayers will only be able to use the equivalent of 60% of a credit note to pay taxes. The remaining amount must be paid in cash. The change is expected to take effect in May 2026.

Tax lawyer Javier Bustos said the measure appears designed to improve the government’s liquidity.

“The IRS is looking to increase its liquidity, because it has likely been issuing too many credit notes to taxpayers and now that’s taking its toll,” Bustos said.

He added that the practical effect is clear: “Taxpayers are being forced to use more cash when paying their taxes.”

Mining expected to contribute more

Beyond tax administration, the government is also counting on more revenue from mining.

The IMF expects Ecuador to collect additional income after changes made to the mining tax regime in December 2025. Those changes included a new methodology for calculating the sovereign adjustment paid by mining companies.

The government expects the mining changes to generate about 0.5% of GDP in 2027, or roughly $650 million.

Mining has become an increasingly important part of Ecuador’s fiscal planning, particularly as the country looks for new sources of dollar income and export revenue. But the sector also remains politically sensitive, with projects often facing environmental concerns, local opposition and legal challenges.

For the government, however, mining revenue is now part of the broader fiscal equation. The IMF program assumes the sector can help improve public accounts over the next several years.

Investment incentives may be reduced

The government also plans to expand the tax base by reviewing benefits granted through investment contracts.

Those contracts often include tax incentives meant to attract private investment. But under the IMF program, Ecuadorian authorities are expected to optimize those benefits, which in practical terms could mean reducing exemptions for some companies.

The logic is similar to the VAT changes: rather than creating a new tax, the government is trying to collect more by narrowing the exceptions that already exist.

That strategy may be easier to defend politically than another rate increase, but it still carries risks. Businesses may argue that reducing incentives weakens investment conditions, while consumers may object when formerly untaxed products become more expensive.

For now, the government’s challenge is to meet IMF targets without triggering a political backlash. The administration is betting that smaller, more technical changes can produce large results. But as more of those changes reach consumers, companies and taxpayers, the fiscal adjustment may become harder to keep out of public view.