This weekend, Enrique Peña Nieto presented his proposal for the tax reform. Despite the approval pending by the senate and congress, the proposals have caused a great deal of discontent among many Mexicans.
When it comes to Baja California and other border states, the main problem is the standardization of the Tax percentage, increasing to 16% up from the current 11%, making it the same as the rest of the country. What is the issue with this? The reason for the lower tax percentage in border states was so Mexican products could compete with those purchased in the United States.
Local business owners have made it a point that this simple measure could cause the loss of at least 100,000 jobs in the next three years. This conclusion, which might sound as an exaggeration, comes from a group of economic experts who held a panel at the offices of the news paper “La Crónica”.
As counter proposals and alternatives to the Presidents plan, the panelists seemed to be in favor of widening the tax base rather than raising the taxes as a whole given that this would affect those with a lower income as well as those who are have a moderate to high income, and asked that the 8 affected states formed a common front.
Lest we forget that 3k million pesos were pardoned to the entertainment titan “Televisa”, actions like this, make people wonder who this tax reform is actually benefiting. Experts agree that what is necessary is for business owners and highly paid professionals to be more responsible and pay their taxes on time, rather than increasing or adding taxes over all, because that as we all know, charging more money doesn't mean that you will get more money.
Nearly 60% of Mexico's income goes to around 500 major companies, is anyone checking if their taxes are paid? Adding to that is the fact that over 50% of the Mexican population lives in poverty, does this seem like there is any kind of balance?
The team from Aristegui Noticias provided a digest of the tax reforms with the following key points:
Impuesto al Valor Agregado (IVA or Value Added Taxes, VAT)
- There will be no taxes on food or medicines
- There will be no tax exemption on purchases, rent or mortgage payments when it comes to housing.
- There will be no tax exemption for educational services.
- All tax payers will pay the same rate of 16% even those in border states.
- All temporary imports for factory assembly will be taxed.
- The 0% tax rate on gum and processed foods for home pets will be suppressed.
- The trade or sale of gold (be it ornamental or art pieces), jewelry, Goldsmithing, and gold bullion will be taxed as well.
- It proposes to eliminate export processing right to apply the rate of 0% to the provision of hotel and tourism related services
- It is proposed that when any asset is donated that proof of the property transfer be provided.
- sets a VAT exemption on interests received or paid to Cooperative Savings and Loan societies, Popular Financial Companies, Community financial societies and rural financial integration organizations
Impuesto sobre la Renta (ISR or Income Tax)
- A 32% income tax will be applied to individuals who's income is greater than 500k pesos a year as well as the current company income tax.
- Stock market earnings and currency will be taxed up to a 10%
- Stock exchange income of individuals will be taxed by 10%.
- The income tax bill will be reduced from 299 articles to 186.
- The reform seeks to eliminate lower tax grades for small businesses
- A new tax grade is proposed to allow Pemex to have operating expenses, given that the taxes will amount to 10% of the production value.
Impuesto Empresarial a Tasa Unica (IETU Enterprise Tax)
-This tax will be eliminated, causing a 144, 500, million pesos loss.
-Cash deposit tax will also be eliminated, however banks will have to keep track of all cash transactions over 15,000 pesos.
Impuesto Especial sobre Produccion y servicios (IEPS Special Tax on Production and Services)
-Sales and import tax on beer with an alcohol level of 14º or more will continue to be 26.5 %
- Beer and Alcohol with 20º or more will have a tax set at 53%
- New tax will be added to soft drinks as well as flavor syrups, essences, flavor powders or flavor extracts.
- New Sales tax will be added for fossil fuels according to their carbon content.
- New tax on pesticides will be added, which will be from 6% to 9%, based on their toxicity level
- Fuel prices will be calculated based on the prices in National and International markets
- A new procedure will be established to which tax authorities will have to abide by when it comes to hearings and defense statements in case of closure of establishments where gambling and raffles are held
- Establishing a requirement for producers and importers of cigarettes and other tobacco products, to print a safety code in each one of the products or packs for their sale in Mexico, following the guidelines the SAT (Mexico's IRS) establishes.