Income Tax for Microenterprises in the COVID-19 Pandemic: A Case Study on Ecuador

Maribel Paredes-Torres,Ana Del Rocío Cando-Zumba,José Varela-Aldás

doi:10.3390/su14052537

Maribel Paredes-Torres, Ana Del Rocío Cando-Zumba + Show 1 more

Open Access

https://doi.org/10.3390/su14052537

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Abstract

In this work, we analyze the income tax in Ecuador in 2020, which was affected simultaneously by two factors: the economic crisis caused by COVID-19 and the implementation of a new tax system. The objective is to evaluate the effects of these factors on the economic status of a group of taxpayers and the difference in tax payments compared with previous periods. A quantitative study was carried out, collecting financial data from 30 microenterprises for three fiscal periods. We also analyze the relationship between sales and the taxes paid in the same year, as well as the difference between the previous regime and the system applied in the first year of the pandemic to determine income tax. The results indicate an increase in the tax paid despite a noticeable decrease in sales due to confinement and other sanitary measures. In addition, we verified a significant difference between the two analyzed regimes, mainly because the pandemic regime calculates the tax based solely on income and does not consider expenses. We conclude that 43.33% of the microentrepreneurs we analyzed concluded the fiscal year with an accounting loss. This implies a debt for the following period and the risk of bankruptcy in the future.

Highlights

Academic Editors: Tomasz Rokicki, Microenterprises are considered highly relevant, representing 90% of all companies worldwide and generating 70% of jobs, according to recent figures from the United Nations, and they are constantly growing [1–4]
This table shows that the taxable base subtotal had negative values caused by a decrease in sales with the COVID-19 pandemic, considered an accounting loss. Another possible reason was tax evasion by not billing all sales to avoid the 2% payment related to the regime for microenterprises (RIM)
This case study showed several problems in the income tax paid in the first year of the pandemic: decreased sales, increased tax payments, and economic losses

Summary

Introduction

Academic Editors: Tomasz Rokicki, Microenterprises are considered highly relevant, representing 90% of all companies worldwide and generating 70% of jobs, according to recent figures from the United Nations, and they are constantly growing [1–4]. In this context, the study of microenterprises on a global scale is important, as they are part of the economy’s engine and represent monetary growth. The importance of small- and medium-sized enterprises is not solely based on the collection of taxes and on the generation of employment, as they represent 99.5% of businesses in the region Of these companies, 9 out of 10 are classified as microenterprises [3,14]

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