Mexican business opposes VAT rise in border region
- 12 October 2013 | Richard Asquith
Plans to remove the reduced Mexican VAT rate for the US-border zone have been criticised by local business.
Mexico border VAT rises to 16%
Currently, the Mexican VAT rate within 10 miles of the US southern border is 11%. This compares to the national standard VAT rate of 16%. The discount is to help keep Mexican companies competitive against imports from the US where there is no VAT.
The plan is to implement the repeal of the subsidy in 2014. The government was forced into this rise as it had backed away from an earlier plan to bring more goods into the VAT net. This included basic foodstuffs and heating. Mexico has one of the lowest tax takes to GDP ratios in the world when oil taxes are excluded. The government in keen to broaden the tax base to help stabilise revenue from the sharp fluctuations it is under because of the dependency on oil prices.
The OECD and IMF have been encouraging Mexico in this direction, and had made much progress with the new President on tax reforms.