New Taxes

An Update

By: Deloitte  & Touche

   The following summary of significant changes to Mexico ’s tax laws was prepared by Deloitte & Touche.

        The Draft Reform that the executive branch presented to the national Congress last year contained the proposal for the New Public Tax Distribution, designed to implement a new tax framework that is efficient, equitable, modern and competitive. It is intended to:

        •Adopt distributive measures to offset the broadened value-added tax            base.

        •Support investment, savings and employment.

        •Facilitate compliance with tax obligations.

        •Generate greater legal assurance.

        •Fight the underground economy.

        To achieve these goals, the Comprehensive Tax Reform submitted by President Fox proposed the incorporation of new laws for income tax and value-added tax, which, while their structure was similar to those in effect up to Dec. 31, 2001 , included major amendments designed to increase the tax receipts of the federal government by about 120 billion pesos.

        Although the draft submitted by Fox was not approved in the terms originally proposed, the Federal Incomes Law, a new Income Tax Law and other changes to different provisions incorporate a series of amendments which, while not meeting revenue collection objectives, are additional burdens levied on captive taxpayers and consumers and are implemented through different provisions.

        In terms of the value-added tax, the amendment proposed in the draft reform eliminated a series of exemptions, and the application of the 0 percent rate for a certain number of acts or activities that enjoyed special treatment and whose collection would mostly be handled by the states or municipalities. While the proposal failed, the Federal Incomes Law grants power to the states to impose local taxes on consumption of goods and services and the activities of certain taxpayers.

        The Federal Incomes Law is also used to incorporate an additional tax on consumption of goods and services, called a luxury tax, on which a 5 percent rate will be levied. The fact that this is included in the ...

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