More Detail on a Mexican Tax than You Were Hoping For

Maricarmen Cortés elaborates on the much reviled IETU (One-Rate Business Tax) and what businesses want from the government's fiscal relief plan:

Mexico is maybe the only country in this economic crisis that raised its taxes, because the IETU rate increased this year from 16.5 to 17 percent, which is why Coparmex, led by Ricardo González Sada, recognizes that it's positive that during 2009 businesses are able to deduct the excess payment that the IETU would have applied from their monthly ISR payment, without the need to wait for their declaration annual, but he insists that the rate must drop to 16.5 percent this year.

What is true is that the Treasury recognizes that the IETU does have a direct impact on the liquidity of businesses, but refuses to modify it in a permanent way despite the fact that the tax was designed as an obligation with a minimum of control, in an environment of financial stability, but it does hit businesses just when one of the effects of the economic crisis --without taking into account the flu-- is precisely the problem of liquidity in financial markets.

Another problem with the IETU is that it doesn't allow deductions for losses caused by the exchange rate, which have been severe because of the devaluation that the peso has registered before the dollar this year as well as the extreme volatility in the exchange market.

Coparmex also insists that the IETU should be modified to allow the deduction of salaries in place of credits, or the deduction of exempt benefits that are obligatory under the law, such as the Christmas bonus or paid vacation.

Another worry of Coparmex that other private sector organizations share is that the announced measures are implemented rapidly and that there aren't too many difficult requirements that make access to the benefits expensive.

It sure seems like there has been a lot of conflict between the president and the business class (which represents a major part of his electoral base) in recent months.