Guillermo Lasso, President of Ecuador, has published a tax reform proposal aimed at improving the economic recovery and fiscal standing of the South American nation.
Personally drafted by Lasso, the proposal forms part of an ‘urgent economic project’ and will be put forward to the National Congress of Ecuador, who will be given a 30-day period to review the proposal in line with the Ecuadorian Constitution.
Lasso seeks to revamp Ecuador’s existing tax framework by proposing a unique ‘point-of-charge‘ tax on digital transactions specifically targeting sports betting – a sector that has seen substantial growth in recent years.
This tax will affect both domestic and international sports betting operators, regardless of whether their businesses are domiciled in Ecuador.
As such, sports betting operators will be expected to pay a 15% tax on their total income derived from prizes. Furthermore, bettors using non-resident platforms in Ecuador will also face a 15% tax on the value of their bet, “charged at the point of transaction”.
Furthermore, a 15% withholding will be applied to the value of players’ winnings, highlighting the government’s commitment to ensuring tax compliance in this sector.
The implementation of this reform responds to the growing presence of sports betting platforms operating within Ecuador without local representation.
Lasso emphasised that Ecuador’s Internal Revenue Service (SRI) had identified at least 23 betting and forecasting sites currently operating. These platforms are also included in the SRI’s scope for the collection of Value Added Tax (VAT).
Despite its potential benefits, the tax reform proposal has its downsides. It is projected to relieve around 340,000 taxpayers, but this comes at the cost of a significant reduction in tax revenue for the country, estimated to be around USD $195 million.
However, taxpayers will be given some respite, as the reform proposes that they can deduct up to UD$ 15,000 from their personal expenses annually, based on the number of dependents they have, to lower their Income Tax.
The unveiling of this tax reform initiative coincides with mounting political tension surrounding President Lasso, who currently faces a political trial for alleged embezzlement in an oil transport contract, charges that the President has vehemently denied.