VAT Decreased
In Mexico, tax evasion is enormous and the search for tools to face it is recurrent. But the VAT is almost 40 years old and has not been able to contribute its main virtue due to the large exemptions that have been granted, and although the gap fell significantly in the 2014 tax reform, the truth is that it did not end and, therefore, It has not highlighted this virtue, much more for political than fiscal or even economic reasons.
Now, within the virtues of regressive taxes such as VAT or sales tax, it is in concrete for both nations, the fact that whoever collects in general, are the companies that sell at the final consumption, that although it generates a cost administrative, this is minor and regularly adhered to the accounting and achieve the corresponding commercial and fiscal compliance in general.
Finally, to the final consumer, be it in the USA or Mexico, the theoretical effect is the same. The sales tax and the VAT is an extra cost to the one who has to pay for the good or service needed. Even in Mexico for ease, it is used commercially to expose prices with VAT, because nothing can do the final consumer to prove it and therefore, in his mind and budgetary capacity, is part of the price to pay. Therefore, raising or lowering sales tax and VAT will always have a negative or positive repercussion respectively for the final consumer; in economic language, an impact next to the demand.
Therefore, in sister cities on the border between Mexico and the United States, the fact that one city has a higher tax rate with respect to the other, will always be an element of loss of competitiveness for the higher rate, at least in the purely final price induced fiscally, although the competitiveness of a city, for no reason is solely based on taxes.
But, also, and for no reason, it must be forgotten that the differentiation of rates causes precisely the loss of virtue. Then, there are the crossroads.
(continues part 15)
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