Brace Yourself: The Sales Tax Has Gone Up In Baja California Sur



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Brace Yourself: The Sales Tax is Going up In Baja California Sur

TBC

Expect to pay more in 2014 at restaurants, your favorite department store and even at the gas pump.  As of January 1st, consumers in BCS will be paying 16% tax on most goods and services.

In a move that does not sit well with most residents of Baja California Sur, the Mexican Senate has finally approved a 5% sales tax increase in the border regions of Mexico.

A 5% tax increase will undoubtedly have a huge impact on many family incomes in the state, as BCSs cost of living is already high.

This brings the sales tax in line with the rest of the country. A uniform sales tax will be implemented January 1st, 2014 across Mexico.

Mexico has a value added tax on many products and services, similar to many other places in the world. The tax is commonly referred to as IVA, which stands for Impuesto al Valor Agregado.

IVA is a federal tax, and was applied differently depending on the location in the country. In the border area, which BCS is considered, the value added tax was applied at 11%; everywhere else in the country, it is applied at 16%.  President Peña Nieto wanted all of Mexico to pay 16%, and he got his way.

Critics, mostly businesses leaders, say the increase in sales tax will drive more people to make their purchases across the border in the United States or even do more of their shopping on the mainland and ship to the peninsula. Small businesses will undoubtedly feel the crunch.

President Peña Nieto claims he just wants to boost the government’s revenue and reduce economic inequality by creating an unemployment fund and greater financial support for education and infrastructure projects.

The uniform sale tax is just one of a series of new reform measures that have now been passed by the senate as well as a majority of state legislatures to dramatically change the way Mexico does business.

Just last week, Mexican state legislatures passed the energy reform bill that will allow private companies to explore for and produce oil and gas in the country.

Mexico has the lowest tax revenue in the 34-nation Organization for Economic Co-operation and Development (OECD), making it difficult for the country to spend on health, infrastructure and social programs that are vital to boosting living standards and growth.

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