Economy

In a bid to boost local economies, Mexico to introduce tax breaks along the southern border

President Andres Manuel Lopez Obrador announced the expanded tax breaks at his regular morning news conference

Andrés Manuel López Obrador, Mexico's President.
Andrés Manuel López Obrador, Mexico's President. Photo: Shutterstock
  • The plan was first launched last year and reduced two taxes – a value-added sales tax known as IVA and the ISR income tax;
  • Now, the country will extend it to 22 local districts, or municipios, along Mexico’s southern border with Guatemala and Belize.

Mexico will introduce fuel and tax breaks along the country’s southern border and extend a program of similar benefits through the end of 2024 along its northern border in a bid to boost local economies, officials said on Friday.

The plan was first launched last year and reduced two taxes – a value-added sales tax known as IVA and the ISR income tax – and will now extend to 22 local districts, or municipios, along Mexico’s southern border with Guatemala and Belize.

READ ALSO: Mexico’s second infrastructure investment plan worth up to $10 billion

President Andres Manuel Lopez Obrador, flanked by his finance and economy ministers, announced the expanded tax breaks at his regular morning news conference.

The tax breaks along its northern border lower the ISR levy from 30% to 20%, and IVA from 16% to 8%, along with adjustments to the tax on gasoline so that there is not a major difference with prices on the U.S. side of the border.

Historically, U.S. gasoline prices are lower than those in Mexico, in large part due to higher fuel taxes in Mexico, and the government has long sought to discourage Mexican consumers from seeking to cross the border to make their purchases.

READ ALSO: Mexico central bank takes gloomier view of economy in 2021

Current northern border tax breaks cover 43 local districts, stretching across the border states of Baja California, Sonora, Chihuahua, Coahuila, Nuevo Leon, and Tamaulipas, home to significant cross-border trade and integrated industries.

Finance Minister Arturo Herrera explained that the border tax breaks will extend to southern states Tabasco and Chiapas, which border Guatemala. He said the benefits will also apply in the capital of Quintana Roo state, Chetumal, which borders Belize.

Get the best insights about Latin America market in your inbox