Tax payments for dependent workers have been made more flexible in the last three years. The Tax Administration (SRI) published the latest income tax payment table for individuals on December 26. Which indicates that those with a taxable income of more than $11,902 a year already start paying taxes. However, this value is calculated by discounting the contributions of the Ecuadorian Social Security Institute (IESS), which are not taxed, and the reduction of personal expenses allowed by law is applied.

Pablo Guevara, consulting partner at Andersen, presents a table of possible scenarios. So if a worker earned $2,305 in those years, he experienced significant variation in tax payments. While you would pay $0.21 in 2021, in 2022 your tax liability would be $927.41. But in 2023, with the new program, the payment would be $321.08, and for 2024, the payment will be $270.04.

These ups and downs occur in accordance with the change in current regulations.

The point is that in 2021, the worker started paying income tax when he had an income of $2,305. If you earned this amount per month, you paid $0.21. The more he earned, the tax would rise, due to the principle of progressivity. But he had to earn $6,251 a month to pay taxes equal to that same amount for the year. That is, I would work for a month just to pay taxes.

On the other hand, in 2022, as a result of the tax reform promoted in 2021 during the first months of the government of Guillermo Lasso, the tax payment applies to people who earn from $1,691 (lower lower limits) and the first annual payment was $24.32. In this case, if someone earned $3,760, at the end of the year they paid the equivalent of one month’s salary in taxes.

But the government itself overturned the reform and from the middle of 2023 the payment is smaller. So, this year the payment starts with higher incomes. Income received must be $2,059 to start paying the $1.04 tax. And according to Guevara’s calculations, a dependent needs to earn $4,297 to end up paying his full salary in taxes annually.

Finally, in 2024, for the purposes of the new table, a person who earns $2,098 already pays a tax of $0.13. A worker or employee would have to earn $4,369 to pay the same amount of tax.

According to Guevara, the scenarios were calculated taking into account the situation of a dependent worker receiving a fixed salary, who would use the maximum deduction of personal expenses in 2021 and the maximum reduction of personal expenses in 2022, 2023 and 2024, without taking into account family obligations and applying progressive income tax tables in effect for each year.

How is IR calculated?

The collection of gross income tax reported by the Tax Administration has increased. According to the data of the entity, in 2022, 4.897 million dollars of income tax was collected, and in 2023 it amounted to 5.292 million dollars. However, this figure does not take into account the effect of deductions. So, if you look at what actually went into the general state budget, according to the website of the Ministry of Economy and Finance, the panorama is different.

While he received $4.314 million in income taxes in 2022; There is no major increase for 2023, as $4.356 million arrived four days before the end of the year.

The lack of liquidity led the Government to problems with the payment of salaries for November. There was also a very tight situation regarding the payment of the December bonuses and it is not known what the payment will be until the end of this month. Salaries in the public sector are financed primarily from taxes, i.e. permanent incomes.