BajaNomad - HIGHER TAXES IN MEXICO WILL AFFECT EVERYBODY

HIGHER TAXES IN MEXICO WILL AFFECT EVERYBODY

DENNIS - 9-9-2009 at 11:09 AM

Just when you thought Mexico has had enough, the government gives a little more:
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http://www.reuters.com/article/marketsNews/idUSN083015682009...

Woooosh - 9-9-2009 at 11:16 AM

Taxes in Mexico? You mean besides the VAT on retail goods and the piddly $200 a year they call a property tax?

DENNIS - 9-9-2009 at 11:20 AM

Quote:

Originally posted by Woooosh
Taxes in Mexico? You mean besides the VAT on retail goods and the piddly $200 a year they call a property tax?

They want to tax all food and medicines 2%.

JESSE - 9-9-2009 at 11:51 AM

Mexico has the worst taxation revenue percentage of all OECD countries. Taxes here are high, specially to small and medium businesses, wich make up about 70% of the tax base. The problem is, very few pay taxes, so the burden is on those who pay. I personally agree with taxing food and medicines, its the only way EVERYBODY will pay. As a business owner its hard for us to keep paying really high taxes so that everyone else can get free services.

Woooosh - 9-9-2009 at 12:29 PM

Quote:

Originally posted by JESSE
Mexico has the worst taxation revenue percentage of all OECD countries. Taxes here are high, specially to small and medium businesses, wich make up about 70% of the tax base. The problem is, very few pay taxes, so the burden is on those who pay. I personally agree with taxing food and medicines, its the only way EVERYBODY will pay. As a business owner its hard for us to keep paying really high taxes so that everyone else can get free services.

No Mexican IRS with or without teeth? People just voluntarily pay their payroll and retail taxes? They thought voluntary taxation would catch on? It would seem no new taxes would be necessary if people weren't stealing the gas from PeMex and the Electricity from CFE. I think the PeMex problem is huge.

Bajahowodd - 9-9-2009 at 12:33 PM

Calderon certainly has been a busy boy in the past couple of days. I'm wondering if many of the moves he's made and is proposing are simply an effort to build the portfolio of his legacy. As for the tax changes, when he took office, the Peso was at 10.90 v $US. For a brief period it strengthened to around 9.7. Currently, at 13.4 or thereabouts, I'm thinking the main focus of cutting government's cost and raising revenue is to prevent a further weakening, or even a collapse of the Peso.

vandenberg - 9-9-2009 at 12:36 PM

Quote:

Originally posted by JESSE
Taxes here are high, specially to small and medium businesses, wich make up about 70% of the tax base. The problem is, very few pay taxes, so the burden is on those who pay.

So Jesse, what you're telling us taxation on the middle class is high, but there's no enforcement ?? Always heard that Hacienda was a worse agency to deal with then our IRS. The little dealings we have had with them surely made it appear that they are more then a match for the IRS bureaucracy. :no:

Woooosh - 9-9-2009 at 12:37 PM

Quote:

Originally posted by Bajahowodd
Calderon certainly has been a busy boy in the past couple of days. I'm wondering if many of the moves he's made and is proposing are simply an effort to build the portfolio of his legacy. As for the tax changes, when he took office, the Peso was at 10.90 v $US. For a brief period it strengthened to around 9.7. Currently, at 13.4 or thereabouts, I'm thinking the main focus of cutting government's cost and raising revenue is to prevent a further weakening, or even a collapse of the Peso.

The economic world talking in general about moving away from the Dollar standard isn't helpful to the Peso either.

DENNIS - 9-9-2009 at 12:47 PM

Quote:

Originally posted by vandenberg
So Jesse, what you're telling us taxation on the middle class is high, but there's no enforcement ??

I think he means that businesses in Mexico can still right off the ten tequila lunches and too many other things.

Eugenio - 9-9-2009 at 01:48 PM

Quote:

Originally posted by DENNIS

Quote:

Originally posted by vandenberg
So Jesse, what you're telling us taxation on the middle class is high, but there's no enforcement ??

I think he means that businesses in Mexico can still right off the ten tequila lunches and too many other things.

Actually what is happening is that business owners are taking the hacienda guy to ten tequila lunches - and including a nice cash "tip" for their "help" in modifying their taxes.

No - there's no comparison of Hacienda with the IRS.

DENNIS - 9-9-2009 at 01:57 PM

Quote:

Originally posted by Eugenio

Actually what is happening is that business owners are taking the hacienda guy to ten tequila lunches - and including a nice cash "tip" for their "help" in modifying their taxes.

WHAT???? gasp...sputter....I'm flabbergasted. Do they really do that? :lol:

I didn't know that but, should have, I suppose.

Woooosh - 9-9-2009 at 02:30 PM

Quote:

Originally posted by DENNIS

Quote:

WHAT???? gasp...sputter....I'm flabbergasted. Do they really do that? :lol:

I didn't know that but, should have, I suppose.

It would appear many are willing to part you from your money- but not much of the money they collect makes it into the gov't coffers.

arrowhead - 9-9-2009 at 05:34 PM

You missed the real zinger. They say they will eliminate the price subsidies on gasoline.

DENNIS - 9-9-2009 at 05:43 PM

Quote:

Originally posted by arrowhead
You missed the real zinger. They say they will eliminate the price subsidies on gasoline.

I did miss that. I wonder what that will do to a liter of gas. It won't be good.

JESSE - 9-9-2009 at 05:51 PM

Quote:

Originally posted by vandenberg

Quote:

Taxes on the middle class are high and enforced very harshly. If your registered as a business like i am, they really treat you like their little cash cow. But theres millions of people making money who are not registered, and don't pay taxes. Plus, big corporations have all kinds of loopholes to avoid paying them as well, so we ar stuck with the burden of paying for everybody else.

shari - 9-9-2009 at 07:35 PM

Yeah Jesse...it is really maddening when you jump through the hoops, get all the bloody permits, pay all your taxes...like 30%...and so many other businesses operate under the table...arent registered, pay no taxes, have no permits etc....gets MY goat too....and you are so right that it is aimed at the middle class...legit business operators.

MitchMan - 9-19-2009 at 10:10 AM

The Mexican government is just plain stupid. They make sweeping tax changes in one year without phasing it in and with very little notice to business so that they can restructure to avoid a massive unexpected loss.

There are many reasons why Mexico has a small tax base and why small businesses go "underground" to evade taxes. These same reasons make doing business very difficult.

First of all, if you have a corporation you cannot deduct an expense against income unless you and the vendor go through the brain dammage of generating a "factura" invoice. Regular invoices are not deductible evidence of expens, even if you use a check to pay for the expense! The Vendor has to have special stationery from which to make his factura invoices and are from specific printers only. Very, very stupid. Technically, if you are a foreignor who has a Mex Corp, you can't deduct expenses incurred outside Mexico such as your travel or phone or any other legitimate business expenses incurred from vendors not in Mexico and/or that do not issue Mexican facturas.

Secondly, the new IETU tax is a whopping 17.5% and if your expenses are incurred before Jan 1, 2008, they won't be deductible! So, if you bought real estate before 1-1-08 and improved it before 1-1-08, or bought a car or boat or any other property, tangible or intangible, before 1-1-08 that you want to sell, you cannot deduct the cost of the real estate nor the improvements nor the cost of the car nor any other expenses or capital costs incurred before 1-1-08! STupid, stupid, stupid Mexico, stupid law!

Thirdly, trying to maintain a checking account is a pain in the _ _ _. They require a minimum balance of $500 USD for a USD account and require a $5,000 MXN balance for a pesos account. You cannot get a balance from a teller, you have to see the manager. If you make checks regularly at, let's say between $200 to $500, then you make a big check for say $3,000, they won't let the check go through because they, the bank, think something is wrong and will bounce your check even if you have enough money in the account! Also, if you don't have any activity in the account for two or three months, they will suspend your account and you will have to go to the bank and ask them to reactivate it. Meanwhile you have a vendor that will no longer accept your checks.

If Mexico would wise up, accept regular invoices as proof of expense, take away the stupid and excessive internal control policies on holding a checking account, and modify the IETU tax to allow all valid expenses that match the sales revenues as dedectible without regard to an arbitrary cut-off date, they could encourage and not inhibit small business growth (and thereby grow the tax base). I personally know many plumbers, electricians, retail trades people and others that deliberately hide money because of the above mentioned problems. If checking accounts were easier to maintain, more small businesses would use them and thereby provide a means for the Hacienda to audit the bank accounts. Instead, they are driving everybody underground.

[Edited on 9-19-2009 by MitchMan]

comitan - 9-19-2009 at 11:27 AM

ptember 18th, 2009
++ Social Development Secretary Ernesto Cordero denied that the two percent consumption tax will have a negative effect on Mexicans who are poor… He said that if the measure is approved, Mexico’s poorest citizens will receive more than what they pay out in taxes.

++ Signaling that there is no longer any time left for indecision, President Felipe Calderón urged lawmakers to back his fiscal proposal to overcome poverty.

++ A U.N. official, Magdy Martínez Solimán, who is in charge of the U.N. System in Mexico, said the two per cent consumption tax is reasonable to support Mexico’s poorest citizens. He called on political parties to debate the tax, since he said, Mexico could emerge from its crisis.

++ The PRI Senate caucus called for broad debate on the two per cent general tax on consumption.

From what I've been reading about this tax it will be a hard sell to get it passed.

[Edited on 9-19-2009 by comitan]

lizard lips - 9-19-2009 at 01:34 PM

I really don't know how you make it Jessie. From what I heard for every dollar you charge the Hacienda takes 40 cents. Is this true?

I believe ten years ago many stores would not give you a receipt unless you asked for it. Now it is law that you must provide a receipt, and if you don't and get caught you are fined thousands of pesos.

MitchMan - 9-20-2009 at 11:22 AM

Thanks for the response, Lencho.

I have got to say when the IETU tax is 17.5% and income taxes are well over 25% on net business income, not being able to deduct all legitimate business expenses is a very expensive situation, not to be lightly dismissed. The small items add-up: Taxi rides, certain meals and minor purchases, cost for copies and postage and telcel minutes and other small items purchased from vendors who do not provide facturas. The larger items such as significant purchases from vendors/service providers who do not provide facturas but do issue invoices. Further when you are out of Mexico but also incurring costs related to your Mexican business activity such as round trip transportation to Mexico, phone and other communication costs, office supplies or other miscellaney purchased stateside for items and quality that are not available in Mexico. These non-factura purchases significantly add-up, expecially if you compare the disallowed expense total to the taxible profit amount, you will see a significant % comparison.

I know that it all depends on your type of business and the magnitude and proportion of your profit margin to expenses, but in many instances it can be significant, especially if you look at it at on an annual cum-to-date perspective.

If you are a "generalist" type person and you don't follow the details closely and your particular profit margin is a high percentage, it won't matter to you. But if you are working with larger volumes and the nature of your business enterprise by comparison to other business enterprises works on a smaller profit margin, it will matter significantly, especially in economically troubled times such as we are in now. In times like these, it will be those businesses that watch their bottom line closely that survive best and will be in a better position to rebound when the economy improves. It's the difference between being prudent and casual.

[Edited on 9-20-2009 by MitchMan]

DENNIS - 9-20-2009 at 11:54 AM

Quote:

Originally posted by lizard lips
I really don't know how you make it Jessie. From what I heard for every dollar you charge the Hacienda takes 40 cents. Is this true?

In this respect, I believe Mexico is just like the US. A creative, not illegal, accountant is worth his weight in bacon-wrapped hot dogs. Much more than gold.

Excuse me...in case you didn't notice, I'm not Jesse.

Eugenio - 9-22-2009 at 10:55 AM

Quote:

Originally posted by lencho

Quote:

Originally posted by MitchMan I personally know many plumbers, electricians, retail trades people and others that deliberately hide money because of the above mentioned problems. If checking accounts were easier to maintain, more small businesses would use them and thereby provide a means for the Hacienda to audit the bank accounts. Instead, they are driving everybody underground.

I agree that a lot of businesses maintain double books, but not with your reasons. The Mexican factura system is not particularly difficult to manage and unless one is dealing with international trade, not a major issue. Yeah, it's a bit more complex than in the U.S., chin up to it. The banks indeed are pretty dysfunctional for one that's used to U.S. paradigms.

But I allege that tax avoidance goes much deeper than this, into civic responsibility and execution. Taxes are a way for the pueblo to support community efforts executed by conscientious, honest representatives selected by those whom they represent. You fill in the rest...

--Larry

Sorry Lencho - but you lost me there somewhere - I think I'm having trouble telling when you're tongue in cheek - and when not...I guess I'm slow - could you fill in some of the rest?

Are you saying that there is something inherent or cultural in mexicans not wanting to support community efforts? Or disdain/mistrust of all things political?..or something else?

Eugenio - 9-23-2009 at 11:31 AM

Thanks Lencho - de acuerdo man.