Gambling in Ecuador has been outlawed for almost a decade and the Constitutional Court ruled against the initiative, despite a proposal for a new common referendum at the end of 2019. But despite the ban, eight online betting operators were subject to a value added tax ( VAT) by the Internal Revenue Service (SRI) of Ecuador.
A tax lawyer, Napoleón Santamaría, clarified in a study by El Comercio that because they are located in another country , companies providing gambling services do not participate in criminal activity and thus the SRI must collect the tax.
Santamaría clarified that people in Ecuador can still access such sites as they have foreign IPs. The action would be illegal, he claimed, if they had a local IP address.
Another lawyer specialised in financial law, Villegas Landázuri, said that it is a paradox that gambling is illegal and that the state collects taxes on the operation.
He claims, however, that, because they have a digital service, it is right for businesses to be subject to VAT. “In my opinion, the fact that something is banned doesn’t mean that they should not be taxed,” the lawyer said.
He also emphasised that one of the reasons why gambling is illegal is due to gambling issues, but “the development of the digital economy was not taken into account.”
“In practice, I think [the ban] wasn’t as useful as people continue to do so on the internet,” he said.
Actually, in the Comprehensive Organic Penal Code (COIP), casinos and betting are considered offences against consumer rights and “other market agents.” The Court ruled in Salinas against a request for a common consultation and argued that, if the findings were positive, they would be “legally unenforceable” because “to modify general provisions of national scope.”