Ecuador Projects Large Sports Betting Tax Revenue
Author:
Jacob McKenzie
Ecuadorian President Guillermo Lasso has presented a second tax reform in the hopes of improving the country’s economy and the living standards for citizens. A draft of the new law that would put the plan into place was presented to Ecuador’s National Assembly on May 11. It was pushed through using a particular rule within the country’s constitution, a clause which allows the president to dissolve congress for six months, leading up to a new general election.
Ecuador is considering a tax reform which would affect the industry of sports forecasting. ?Mufid Majnun/Unsplash
Sports Forecasting vs. Sports Betting
One of the biggest changes in terms of how gambling activities will be taxed under President Lasso’s new plan is associated with a specific aspect of sports betting. The focus is not on sports betting platforms themselves, but a cottage industry that supports it: sports forecasting.
An assessment took place connected to the new economic plan, which zeroed in on how much the sports forecasting industry has grown and how it supports the sports betting industry. The president’s plan infers that, indeed, sports forecasting is connected to gambling and should therefore be regulated and taxed like gaming would be.
The plan proposes to create a new tax on companies that work in sports forecasts amounting to 15% of their income. Those working in the Ministry of Economy and Finance and Ecuador’s tax agency, the Internal Revenue Service, estimate that the plan could be initiated by the start of 2024.
It is also estimated that the sports forecasting tax, alongside all of the other proposed reforms, will help generate more than $10 million USD in tax revenue for the country. Of course, this is not only due to changes in how betting activities are taxed, but it is a topic that explanations of the reform have offered more research into.
For example, they define sports forecasting tools as any web or mobile app that helps users make predictions about sporting event results. This can cover many different kinds of sporting games and are seen as in service of those who bet on sports.
Furthermore, Ecuador’s government has already found several platforms that are based in Ecuador and specialize in just this. It has identified even more platforms which operate in Ecuador — and have a history of taking payments there — but that have originated offshore. The new ruling would affect all platforms, local and foreign.
Overall, it is estimated that Ecuador hosts activities of 23 forecasting or sports betting platforms. Online sports books also are subject to paying VAT in Ecuador. Additional tax will be based on the size of prizes won via sportsbooks.
To combat the issue of offshore betting platforms not paying a tax contribution, the reform also includes a clever plan. For offshore sites, the player will be responsible for paying a 15% take on their own bet when placing the bet, as it cannot be collected from the platform.
A similar situation will happen when players win. Any earnings will also have 15% automatically deducted for tax. According to Ecuador’s tax agency, companies in this industry have been monitored closely for the last year. Audits have also been ordered on all of them to check if they have paid tax correctly.
The agency concluded that reform was needed to make sure that tax across this part of the gambling world is adequately calculated and collected. Once this reform is in place, the government, companies and tax authorities will have one year to work together, in order to be prepared for the law going into effect.
Ecuador’s approach to the sports betting cottage industry is a bit of a conundrum, given that all forms of gambling were banned there in 2011. However, the justification for addressing sports forecasting is rooted in another bill from 2019, which decreed that the country can still tax industries that are in some way associated with gambling but which themselves operate on a legal basis.
