Income tax exemptions in Ecuador considering the equity principle

Abstract

This paper critically analyzes the use of tax exemptions within the Ecuadorian fiscal system, evaluating their effectiveness and their impact on tax equity. It begins with a conceptual and legal framework of the Income Tax (IR), detailing its origin, evolution, and the most recent reforms, especially those adopted between 2022 and 2024. The study reviews the elements that constitute the tax obligation, as well as the treatment of income tax for legal entities, including applicable rates and reinvestment benefits. It further explores exemptions granted to low-income individuals, the elderly, people with disabilities, and specific economic sectors such as free trade zones and strategic activities. A distinction is made between exemption and remission, and the doctrinal and constitutional foundations of the equity principle are examined. The analysis shows that, although exemptions serve redistributive and incentive functions, their dispersed design and lack of rigorous evaluation led to inequities and reduced fiscal efficiency. The paper concludes with a call to review and reform these policies to ensure a more just, progressive, and transparent tax system that contributes to sustainable development and social cohesion in Ecuador. General Area of Study: Law. Specific area of study: Tax Law. Type of study: Systematic bibliographic review.