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danaeb
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Mexican Senate approves 16% border VAT tax
An increase from the current 11%. To take effect Jan 1st
http://www.lacronica.com/EdicionEnLinea/Notas/Nacional/30102...
[Edited on 10-31-2013 by danaeb]
Experience enables you to recognize a mistake every time you repeat it.
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dasubergeek
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So that means the signs ("UN ROTUNDO NO AL AUMENTO DEL IVA!") will be down by April, right?
I get why they did it, but that's a big jump all at once for the people living there.
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Hook
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Apparently, the details will need to be worked out as members of opposition parties walked out of the Senate after the vote.
http://www.reuters.com/article/2013/10/30/us-mexico-reforms-...
Up next, vehicle importation permits for Baja below San Quintin?????
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Cisco
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This really will have an effect on border relations.
"TIJUANA — After months of public outcry and political debate, Mexico’s Senate on Wednesday gave final approval to a measure that will raise the sales
tax in Baja California and other border regions by 5 percentage points.
The legislation will create a uniform sales tax across Mexico starting Jan. 1---and erase lower rates for border areas. It has inspired a state
secession movement and stirred bitter criticism of federal legislators from Baja California who supported the change. The state’s business leaders are
weighing legal action to block the tax hike, which they said will lead to price increases and encourage consumers to shop across the border in the
United States.
“They’re causing harm to some 9 million Mexicans who live on the border,” Gov. José Guadalupe Osuna Millán said Wednesday after the measure’s passage.
Business owners across the border in California “are already rubbing their hands” in anticipation of more revenues brought by Baja California
customers, Osuna Millán said.
Wednesday’s Senate vote raises the sales-tax rate from 11 percent to 16 percent. The legislation is part of a broad tax-reform package spearheaded by
President Enrique Peña Nieto, who wants to boost the government’s revenues and reduce economic inequality through actions such as the creation of an
unemployment fund and greater financial support for education and infrastructure projects.
Backers of the changes said they will bring Mexico’s tax-collection structure more in line with those of other mid-tier countries and stop Mexico’s
practice of relying on oil revenues to compensate for its low tax collection, which is about 10 percent of the country’s annual output.
The newly approved legislation includes a set of changes affecting maquiladora factories, such as elimination of the sales-tax exemption for temporary
imports but also provisions that allow them to receive a 100 percent tax credit or post bond until the finished products are exported.
Those measures also would end the preferential corporate income-tax rate for maquiladoras, raising it to the general 30 percent business standard. And
it would bring a partial elimination of deductions for certain fringe benefits paid to factory workers.
The changes “are pretty complex,” said José Larroque, principal partner with the Baker & McKenzie law firm in Tijuana. “You need to sit down and
understand it, but there are going to be more taxes to be paid.”
Baja California’s top business groups — Coparmex, Canaco and Consejo Coordinador Empresarial — have staunchly opposed the sales-tax increase from the
beginning. But as the issue came to a head in recent weeks, the outcry has broadened.
Journalists cornered legislators who supported the tax changes, mostly members of Peña Nieto’s Institutional Revolutionary Party, the PRI, demanding a
public accounting. A Facebook community that advocates secession, Republica de Baja California, has garnered 131,000 “likes” in recent weeks. “Baja
California for Baja Californians,” one supporter wrote Wednesday.
Members of the Peña Nieto administration have said that residents in Mexico’s border regions, where incomes are on average 27 percent higher than the
national average, should not pay less sales tax than those living in poorer areas of the country
“It is a pity that the (central government) doesn’t understand us,” said Osuna Millán, who will end his six-year term Friday. The border “is a
different region, that every day must compete with a powerful country like the United States.”
A study by Colegio de la Frontera Norte, a federally funded think tank based in Tijuana that studies issues on Mexico’s northern border, concludes
that the sales-tax hike will harm Baja California’s economy. The revamp will lead to price increases “and reduce the quantities that residents of Baja
California consume,” the report said.
Some residents may turn to the state’s informal retail sector, while others will cross into the United States to make purchases, said Alejandro
Brugués, an economist and one of the study’s authors. “One possibility is that the shrinking of the economy could mean that instead of increasing tax
collection, it could be decreased.”
On Wednesday, Sen. Ernesto Ruffo of Baja California said during a speech on the Senate floor: “In the medium term, we’ll lose many jobs, and perhaps
long term, all of them. On the border, a 16 percent tax takes us out of the competition.”
But Ruffo’s party, the pro-business PAN, was unable to win enough votes in the Senate or Mexico’s Chamber of Deputies. Support for the Senate bill
came from members of the PRI, who joined forces with the Green Party of Mexico and some members of the Party of the Democratic Revolution.
Kenn Morris of San Diego, president of the market-research firm Crossborder Group Inc., said the tax changes could both benefit and hurt business
interests in Southern California.
“One the one hand, Baja California’s consumers will have even more incentive to go shopping and spend some of their discretionary money on goods in
southern California stores,” he said. “One the other hand, U.S. companies that supply the maquiladora industry may see some of their sales decrease
once Mexico’s maquiladoras are going to be taxed 16 percent upfront on those industrial inputs.”"
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Hook
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I dont believe a 5% increase is going to force more people to shop in the US. Prices on goods imported into Mexico generally are 30-40% higher than
what I could get them for in the US. All that extra cant be transportation costs in a country with cheaper diesel and low wages.
Maybe big businesses will have to reduce their ridiculous profit margins to keep customers down here. You know, actually COMPETE for business.
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chuckie
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Will the increase apply to food as well?
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David K
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Fools in government... Raising taxes LOWERS income to the treasury... Lower taxes increases economic growth and employment. More people paying a
little tax far out-produces a few people paying a higher tax!
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cbuzzetti
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Do Mexicans pay income tax? I dont know how the system works here so if anyone could enlighten me that would be great.
Thanks
BajaBuzz
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shari
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we pay 11% and some other tax on top of that for our room rentals too...people are VERY worried about this tax as it means we all have to raise our
prices....taxes go up but wages stay the same or in the case of the lobster fishermen here in Asuncion, the situation is dire as the price for lobster
is HALF of what it was last year which means so is their income! dang. I need to start charging tax on top of the room rental starting in January
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monoloco
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| Quote: | Originally posted by cbuzzetti
Do Mexicans pay income tax? I dont know how the system works here so if anyone could enlighten me that would be great.
Thanks |
There is an income tax but close to 100% cheat on it, the most common way is declaring a low
official salary and paying the rest in cash, off the books, and businesses under report cash receipts. Mexico is a largely cash economy, there is no
efficient way for Hacienda to enforce the income tax, this is why they want to increase the scope of IVA. It's unfortunate because IVA is hardest on
the poor and middle class.
"The future ain't what it used to be"
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Hook
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| Quote: | Originally posted by chuckie
Will the increase apply to food as well? |
I think that is still to be negotiated. Believe it's all tied up with that junk food tax they are considering. Also believe that some food staples
will be exempt.
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Hook
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| Quote: | Originally posted by shari
we pay 11% and some other tax on top of that for our room rentals too...people are VERY worried about this tax as it means we all have to raise our
prices....taxes go up but wages stay the same or in the case of the lobster fishermen here in Asuncion, the situation is dire as the price for lobster
is HALF of what it was last year which means so is their income! dang. I need to start charging tax on top of the room rental starting in January
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I have never stayed at your place but if we assume that your rooms cost 80.00/night, including the 11% tax, a 5 per cent increase will be about
4.00/night.
Will people stop coming because of an increase of 4.00/night? Probably not. Any of your competitors will also have to pay it.
I think the Mexican government is wise in weaning their Federal budget off of the variances of the oil market. There is a world oil glut developing.
Oil could be 80.00/barrel in the near future. And until they allow some private investment into Pemex, their production will probably continue to go
down.
As dysfunctional as Hacienda is at collecting income taxes, this is probably their best method.
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monoloco
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| Quote: | Originally posted by lencho
| Quote: | Originally posted by monoloco
There is an income tax but close to 100% cheat on it, the most common way is declaring a low official salary and paying the rest in cash, off the
books... |
Meh. And how would that benefit the employer (the guy who's paying the salary? |
Because, I imagine, he's
grossly under reporting his income and hiding it off the books also, (Mexicans in general don't trust the banks or the government) plus the workers
would demand more pay if more was withheld due to higher reporting. I have been on many construction sites here on payday, when everyone gets a check
for close to the minimum wage, out of which seguros and other deductions are withheld, then they also receive an envelope containing effectivo which
represents the majority of their wages.
"The future ain't what it used to be"
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MitchMan
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A few months ago, the “new” sales tax was not only said to increase the rate in Baja from 11% to 16% but also to begin applying to both food and
medicines for the first time. Don’t know if what just passed will actually apply to food and medicines…hope not.
Sales tax is a “regressive” tax that disproportionately extracts money from the lower income people than from upper income people because lower income
people spend all their money and buy items subject to sales tax proportionately more than do upper income people that do not have to spend all their
money. Every economist knows this.
Also, the effect of a sales tax increase and the effect of a new sales tax application will reduce the amount of taxable items sold and will reduce
the profit of the vendor on those items sold. Therefore, the economic effect is to reduce production and profitability, both of which result in
detriments to the economy.
While the tax may increase government revenues, it is detrimental to the economy and to the people and is therefore a stupid, short sighted, and
inefficient way to solve their government revenue issue.
There are some benefits to being a cash economy. But the way to stimulate the economy and get more government revenues is to do something about their
demand type bank account policies and get rid of their dumb factura system. If they did, more people (including individual independent contractors)
would use checking and saving accounts and that alone would stimulate commerce and monetary circulation. Also, it would go a long way to bring
visibility to the "under the table" economy for income taxing purposes.
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DENNIS
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| Quote: | Originally posted by Hook
Maybe big businesses will have to reduce their ridiculous profit margins to keep customers down here. You know, actually COMPETE for business.
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Amen.
Also, it's a good thing the federal government owns the gas/fuel market. They shouldn't tax themselves since all they need to do is raise prices per
liter.
Well see how this goes........if they decide to pile on 5% to the existing price. It would be a major rip-off.
"YOU CAN'T LITTER ALUMINUM"
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monoloco
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| Quote: | Originally posted by lencho
| Quote: | Originally posted by monoloco
I have been on many construction sites here on payday, when everyone gets a check for close to the minimum wage, out of which seguros and other
deductions are withheld, then they also receive an envelope containing effectivo which represents the majority of their wages.
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Fascinating. My main experience has been as a government employee, where the amount of oversight would make
that strategy impractical; I suspect employees of most big companies actually DO end up paying their "fair" share of income taxes...
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You are probably correct about government and corporate employees but the majority of people in Mexico don't
work for big companies, and I'm sure that government employees don't report their income from graft.
[Edited on 10-31-2013 by monoloco]
"The future ain't what it used to be"
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aguachico
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Any decrease of income or increase in cost of goods is bad news for the people I know that work for a living in TJ. I know people that were elated
when a small position change in the fabrica equated to a 100 peso a week increase in salary.
To turn around and take that from them is just plain wrong.
The political machine in Mexico is so sad, it's depressing.
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shari
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You would be surprised by the little things that guests dont want to pay for. We had a guy a few days ago that when I told him he needed the $5
biosphere reserve bracelet, he said he would rather leave right now than pay that....sheesh.
We have lost clients over $5 before.
Also where people used to be paid in cash, the bank card system has replaced that....mostly so that the payroll trucks arent going to be assaulted.
The fishermen at the coop already pay a ridiculous 35% in income tax.
this tax will be really devastating for the middle class and small business operators.
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Bajaboy
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I read some where that Mexico has one of the lowest tax collection rates in the world. With that said, it sounds like it's time to pay the piper.
While probably not fair to many, the bills need to paid by someone.
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dasubergeek
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Part of the issue is that maquiladora bit that they glossed over in the article. The reason the maquilas are there, besides easy transportation to the
U.S., is because taxes are significantly cheaper along the border. The IVA is a value-added tax, so in addition to the increase in corporate tax, they
will have to pass along that additional 5% in IVA—and while they may not have to pay it themselves thanks to the bonding exception, that money has to
get paid somewhere, which just shifts it down the line to the mayoreo/menudeo people.
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