[SNE] 2019-2024 Northern Border Program (15th part)

VAT Decreased

The promise of AMLO is to lower the VAT in each border city to the amount that the sister city has of sales tax. But in particular, in Ciudad Juarez, the municipality's border (jurisdictionally) is both with the main sister El Paso, Texas and with the cities of Sunland Park and Santa Teresa, New Mexico, with obviously 2 different sales tax rates at least. The most likely scenario is that of El Paso, Texas, but that is one of the issues to be solved since there are significant differences between both options.

On the other hand, there is the issue of the VAT virtue. No Mexican government, at least recent, has wanted or managed to fully homologate VAT. The current president Enrique Peña Nieto, advanced, but did not achieve the goal completely. Therefore, not using its main virtue is by far, sacrificing the best collection capacity of the Country.

The promise of AMLO moves away from the use of this virtue. Although apparently the Income Tax rate will be revised, assuming that more economic agents will pay, if they are lower rates, for which the virtue of the VAT is not required, in principle of idea, but only applicable to the border; so we will continue without enjoying the cited virtue of the VAT in the Income Tax at the National level. However, in the long-term perspective, the federal tax collection, in general, is still being neglected.

On the other hand, under the understanding that the VAT reduction benefits the final consumers, then technically there would be an effect of increase in consumption and therefore a benefit to the purchasing power of the border, even Americans, because although there is talk of salary increases at the minimum wage scale, the truth is that we will continue to have labor costs in general, lower than in the US.

Furthermore, if we add the other elements of the Program for the Northern Border 2019-2024 (free zone, Income Tax, minimum wage and public investment), it would be expected that this consumption will grow strongly and, consequently, private investment.

But, just as with the issue of Free Zone, if there is no increase in the overall productivity of the border, economic growth will bring with it inflationary pressures, which are still undetermined, but which must be estimated in order to know how to react.

(continues part 16)