Ecuador applies 0.5% tax on credit transactions to finance cancer care

A new policy-making body in Ecuador, which includes the governor of the central bank Diego Martinez, is forcing the general public to pay a tax of 0.5% on every "credit transaction" and is using the funds to finance cancer care.

The Board of Monetary and Financial Regulation and Policy – which includes a number of government representatives, including the minister for economic policy coordination – announced the resolution on October 9.

Under the new rule, financial institutions will charge an additional 0.5% on their credit operations, ranging from deferred loans with credit cards to repurchase agreements with the private sector, and then transfer that sum to the Cancer Fighting Society of Ecuador.

The private sector financial institutions act as the withholding agents of this contribution, that will be "paid by the holders of the credit operations", says a spokeswoman of the ministry of economic policy coordination, the government department that supervises the board.

The tax took effect this week, and will be calculated on an annualised basis taking into account the remaining term of the transaction, when this term is less than one year, according to a statement published by the central bank.

Nevertheless, there are exceptions to this rate, since public bodies will not be obliged to pay this contribution. And in cases of economic or social difficulties, the rate may be reduced to 0.01%, with the agreement of the board. According to official data, banks have issued an average of $1.624 billion in loans in each of the first eight months of the year. Thus, if an additional 0.5% is paid on every transaction, the measure could raise up to $8.1 million per month for cancer care.

The Cancer Fighting Society of Ecuador will be the institution receiving this contribution, according to the ministry spokeswoman, who explained that it is the state's responsibility to establish "a permanent source of funding to meet the needs of people sick with cancer", guaranteeing "the right of individuals to receive quality health services".

This tax was created in response to new legislation passed in September, which consolidates 30 existing laws governing the financial system.