Guillermo Lasso, president of Ecuador, is implementing a 15 percent tax on sports betting in an effort to improve the economic recovery for his country.
Lasso published a tax reform proposal that he said would improve the fiscal standing of his country. The proposal, which was written personally by Lasso, said this was an “urgent economic project.”
The Ecuadorian Constitution states that Lasso must deliver the draft to the National Congress who will have 30 days to review it.
The goal, according to Lasso, is to update the country’s existing tax framework. He hopes to accomplish this by creating a unique “point of charge” tax on digital transactions which would specifically affect sports betting. That industry has seen major growth over the past few years.
Affecting sports betting operators both in and out of Ecuador, they will be taxed 15 percent on their total income. Customers will also be affected as well, with a 15 percent withholding to their winnings.
The Ecuador Internal Revenue Service (SRI) said there were 23 betting sites doing business in the country. They are subject to the tax even if they aren’t in the country. It is unknown how the SRI would collect the tax from those businesses, especially when it might be difficult to ascertain how much of their revenue comes from customers in Ecuador.
The other issue is the reduction in tax revenue for the country. While approximately 340,000 taxpayers will see relief, the reduction in tax revenue will be around $195 million.
The country tried a similar plan with online casinos three years ago. The SRI targeted eight companies and tried to collect value added tax (VAT). This was despite the fact that gambling in Ecuador is illegal.
Still, the SRI went after the online casinos because they had a digital footprint in the country.
Villegas Landázuri, a lawyer specializing in financial law, told SBC Americas at the time that it was a contradiction that gambling is illegal and that the State collects taxes on the activity.
However, he added that the companies are subject to VAT since they have a digital offering.
“In my opinion, the fact that something is banned doesn’t mean that they should not be taxed,” Landázuri told SBC.
It was undetermined how successful the plan worked. Lasso’s current plan should show more results. He might not be able to collect from the sports operators outside of Ecuador but the SRI should be able to collect the tax from those businesses inside the country.
