The VAT and the Income Tax will have an adjustment in the border.

The VAT and the Income Tax will have an adjustment in the border.

Since 2014, year when the Value Added Tax (Impuesto al Valor Agregado, IVA in spanish) were homologated to a rate of 16% all over the country, it has generated an enormous controversy about if the border IVA should decrease or not.

Derived from this, our elected president, Andrés Manuel López Obrador, proposes the reduction of this tax at the rate of 8%.

This change seeks to benefit the border regions to be more competitive against the United States in a price battle, since, these regions that live largely on tourism and industry, have a tax at a rate of 16%, it would imply that some products could be obtained at a lower price in some areas of the neighboring country because it’s sales tax rate ranges between 8 and 10%.

Likewise, it can generate investment in the northern part of the country, which would favor the creation of different jobs.

Risks of the low to the border VAT.

Since Mexico has a VAT collection considered as low, reducing the tax rate in border regions to 8% would imply that the State must implement mechanisms that help recover the collection that would be lost.

It will be necessary to wait for the details of the new tax legislation, to carry out an analysis on the measures that will be taken, hoping that they will not be burdensome for the taxpayers of the other zones of the country.

Reduction of income tax (Impuesto Sobre la Renta, ISR in Spanish) to 20% and increase to twice the minimum wage.

Regarding Income Tax, it will be reduced at a rate of 20%, in order to boost investment in 44 municipalities in the north of the country.

Along with this measure, the minimum wage increase is proposed to double, so it aims to reduce poverty and marginalization, as well as increase jobs in the border strip of 30 kilometers in the north of the country.

It is worth mentioning that these measures have already been supported by the current governors of Tamaulipas, Sonora, Nuevo León, Baja California and Chihuahua.

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