A question was asked on another °µÍø½ûÇø site about why (some) generic brand drugs produced in Ecuador (can be) much more expensive than brand names imported from the US; After a little digging, here's what I found:
There are a variety of duties and taxes that Ecuador utilizes (just as the US and all other countries do), to buffer the local economy and local producers, manufacturers, suppliers etc. from dumping of bulk foreign imports, i.e.:
Value-added tax (VAT) is levied at the rates of either 12% or 0% on the transfer of goods, import of goods, and the rendering of services, as well as on services rendered within the country or imported. Royalties and intangible property, imported or locally paid, are also levied with a 12% VAT. In addition; Most consumer goods pay 25% import duty, while intermediate goods are usually imported at a 10% or 15% rate.
However, raw materials and capital goods generally pay 0% to 5%. For example; The following goods are taxed at a 0% rate upon either importation or local transfer of ownership:
-Most agricultural goods and foodstuff, when these remain in their natural state; this includes refrigerated or packaged goods that have not undergone further processing. Also included in this category are milk, meats, sugar, salt, bread, butter and margarine, flour, and cooking oil.
-Fertilisers, insecticides, animal foods, and similar products, including the raw materials required for processing such goods.
-Agricultural machinery and equipment.
-Goods that are exported.
-Paper and books.
-Sanitary pads, tampons, menstrual cups, and popular disposable diapers.
-Importation of fuels derived from hydrocarbons, biofuels, and their mixtures, including LPG and natural gas, destined for internal consumption.
-Drugs, medicines, masks, oximeters, alcohol, and antibacterial gel with a concentration of MORE THAN 70%, including raw materials for their production.
*Although Ecuador does not produce much the raw materials / chemicals / agents used for these products, the 0% tax encourages Ecuadorian companies to start ventures making use of these concentrated bulk medical products used to produce local generic brands of medicines, vaccines, supplements, vitamins, etc. This means, however, that production of brand name and generic medical products, using these bulk sources, are then subject to the costs locally incurred by:
-Refinement, testing, and approvals by Ecuadors government health and consumer products agencies.
-Processing, manufacture, labour, and quality control review costs
-Licencing, packaging, distribution costs
All of these costs are already factored in for the same or similar products produced in the US. The advantage the US has is that the costs for raw material, manufacturing and labour costs built into the consumer price for the end product are minimized and spread out over a much larger consumer market base than the much smaller consumer base in Ecuador.
Source: PWC Worldwide Tax Summaries; Ecuador - Corporate, Other Taxes
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