Ecuador’s president Rafael Correa signed an exclusion of advance payments for the fiscal period 2015 for flower exporters, according to a news release. The decision was made official through Executive Decrees 645 and 646, published April 3.

According to the decree, the measure comes under Article 41 of the Organic Law of Internal Tax Regime, which states that “when sectors or subsectors of the economy have suffered a drastic drop in their income, the President of the Republic may reduce or waive the advance fixed value to the sector or subsector by decree, all this with the appropriate report of the Director General of the Internal Revenue Service.”

Eduardo Letort, owner at the Hoja Verde Group in Cayambe, Ecuador. Eduardo Letort, owner and general manager at Hoja Verde farms in Cayambe, Ecuador, explained to The Produce News that it is a cash flow initiative only. It does not mean the farms aren’t required to pay taxes — the full tax obligation will still need to be paid in March and April — but they will not have to make the usual September pre-payment. Farms in Ecuador are normally required to pay six months in advance (in September) an amount equal to one half of the previous year’s taxes.

“For example, if last year you made $100,000 and your tax was 22 percent, you would pay $22,000 [in March], so for next year you would have to advance 50 percent [$11,000] in September,” said Letort. “You wouldn’t know how you were going to finish the year, but you would still have to advance 50 percent [of last year’s taxes]. If you finish the year and you didn’t make that income, or you lost income, the state will keep that advance for the next year.”

This exemption should help flower growers’ cash flow crisis resulting from the current economic troubles they are facing. Also, since many growers are seeing a decrease in business this year, they will not be overpaying taxes forward based on the previous year’s higher income.

“It helps cash flow because September is the month we have to pay an additional wage,” Letort said. “In Ecuador you have to pay 14 wages. Every month you pay a wage, and then you pay an additional wage in September and another wage in December. So in September we used to have to pay the advance for the taxes, the normal wage and the additional wage; it was very heavy for the company. Now with the suspension of the advance tax, September will ease a little bit of the cash flow.”

The flower industry in Ecuador is facing a critical situation due to a decrease of exports, the devaluation of the ruble and the euro, economic sanctions imposed by the European Union on Russia, and loss of competitiveness against countries like Kenya and Colombia, which has resulted in Ecuadorian flowers being replaced by others.