May 19, 2023
Ecuador's President, Guillermo Lasso, has proposed an 'unpopular' tax reform program. The president aims to introduce a new sports betting levy aimed at boosting the South American country's economic revival plans. Drafted by President Lasso himself, the proposal is part of the larger "pressing economic endeavor" and will be introduced to the National Congress of Ecuador. Once presented, the country's constitution gives the legislators up to 30 days to review it.
It's to be noted that the government is attempting to transform Ecuador's current taxation system by introducing a 'point-of-charge' levy on all online transactions, especially targeting sports betting, which has become increasingly popular in the country in recent times. The new tax proposal will apply to all foreign and local sports betting operators if Congress approves it.
In the new proposal, sports betting operators must pay a 15% levy on their total income. Additionally, Ecuadorians betting on sports on offshore platforms must pay a 15% tax on their total bet amount, to be deducted at the transaction time.
As if that's not enough, the government in Ecuador is proposing a 15% withholding tax on all player winnings. This proves the government's commitment to ensuring complete tax compliance in the fast-rising industry.
The tax reforms are part of Ecuador's broader strategy to control the thriving sports betting industry. It's believed that this reform is in response to the numerous sports betting sites operating in the country without a local presence.
Lasso highlighted that the Internal Revenue Service (SRI) had discovered at least 23 gambling websites currently operating in Ecuador. The revenue collector added that these platforms are required to remit Value Added Tax (VAT).
Although the proposed tax reform is envisaged to bring some benefits, critics have pointed out some downsides of enacting it. Lasso's proposals are expected to benefit nearly 340,000 taxpayers. However, the reforms may cause a considerable decline in Ecuador's tax revenue, with an estimated loss of $195 million.
But it’s not all bad news for the taxpayers. The Lasso reforms will offer them some much-needed tax relief by deducting $15,000 from their total expenditures. But this will depend on the number of their dependents. In return, this reduces their Income Tax significantly.
President Lasso must work hard to talk the legislators into approving the new proposals. The president faces a charged political climate because of the ongoing court case for purported misappropriation of a petroleum delivery agreement. He has vehemently refuted those claims. Lasso has since dissolved the National Assembly on account of trying to impeach him. This should shelve the ambitious taxation plans in the meantime.
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