When tax reform passed by the Mexican legislature at the end of 2013 was implemented, one of its provisions included raising the VAT tax charged on imported goods in the country’s border zone (up to twenty-two kilometers from Mexico’s international boundary with the United States) from eleven to sixteen percent. At the time, the hike in the Mexican border VAT tax was opposed by residents of states throughout the border region. When the law was passed fifty-eight thousand individuals signed a petition in support of the repeal of this provision of the tax reform package. Additionally, an appeal was made to the Supreme Court regarding the Mexican border VAT tax increases, and was, subsequently, dismissed.
At the beginning of this month, the president of Mexico’s Chamber of Deputies, Silvano Aureoles Conejo, received a Senate draft of an amendment to the new tax reform law that would revert the Mexican border VAT tax rate to its pre-tax reform rate of eleven percent. The initiative was presented by Senator Ernesto Ruffo Appel of Mexico’s PAN party, but was signed by legislators from a diversity of Mexican political parties. The rationale given for reconsidering the five percent hike in the Mexican border VAT tax has to do with the assertion that people and businesses in the region that abuts Mexico’s border with the United States live under different geographic and economic conditions than those experienced by the same in other regions of the country. For instance, a five percent increase in the Mexican border VAT tax rate makes the price of retail goods sold on the Mexican side of the border less competitive relative to those that Mexican border residents can procure by traveling just across the international boundary. In essence, the Senators raising the issue argue that a higher VAT tax in Mexico’s border region has pejorative ramification for both business and Mexican border state consumers.
While some have experienced the negative effects of the tax reform implementation of an increase in Mexican border VAT tax rates, others are experiencing a benefit. Noteworthy members of this include Mexican Customs. Officials at the Tijuana port of entry in Baja California, which is the second largest border crossing after Nuevo Laredo, point to an increase in revenue, as a result of changes in the tax laws that changed on January 1. As of the present, Mexican Customs at the Tijuana crossing have collected an approximate total of seven billion pesos in VAT tax revenue.
As regards, manufacturers operating in the border region. Those that go through the process of being certified as IMMEX program companies will be exempt from all payment of Mexican VAT tax on imported raw materials, equipment and components that are incorporated into product for export. A reduction of the Mexican border VAT tax would benefit those companies that do not go through the process and obtain IMMEX certification.
The president of Mexico’s Chamber of Deputies has submitted the Senate’s appeal for the reversion of VAT tax charged on imports into the border are back to its pre-tax reform eleven percent to the nation’s equivalent of the US’s IRS, the Secretaria de Hacienda y Credito Publico (SHCP). A ruling on the matter is pending.