Mexico ducks VAT rise on foods and medicines

Mon 9th Sep 2013

The Mexican government on Saturday stated that it has dropped plans to bring basic food and medicine into the Mexican VAT net.

The plan has been to try raise the share of tax tax of GDP from 14%, one of the lowest in the world, to help reduce the dependency on oil duties

The plan met stiff opposition from those who are concerned that it will disproportionally hit the poor, which makes up over 50% of the Mexican population.  Whilst the government had hoped to counter these worries with a range of allowances for the poorest, the recent slow down in the Mexican economy has meant this could not be afforded.

The Mexican VAT rate at 16% remains around the average for Latin America, but is well below the EU average VAT rate of over 21%.  The country offers a reduced 10% rate in the area bordering the US frontier, althought this will be withdrawn in 2014.