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AMLO decrees tax cuts for northern states

The decree seeks to give an edge to northern Mexican businesses, which compete with U.S.-based companies across the border

President López Obrador decrees tax cuts for northern states
President López Obrador - Photo: Ivan Stephens/EL UNIVERSAL
English 02/01/2019 12:36 Reuters Mexico City Michael O'Boyle Actualizada 12:36
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On Monday, Mexico’s President, Andrés Manuel López Obrador, decreed tax cuts for northern states that he says will help boost economic growth and deter migration to the United States.

An executive order in the government’s official gazette granted lower rates for both value-added and income taxes in 43 municipalities in states such as Baja California, Tamaulipas, Sonora, Chihuahua, Nuevo León, and Coahuila, an area that has become a flashpoint over U.S. President Donald Trump’s policies to deter undocumented migrants, including building a wall.

López Obrador’s tax cuts could reduce government tax income in 2019 when he will implement a budget that seeks to use spending cuts to help fund new social welfare and infrastructure projects.

At an event in Monterrey on Saturday, López Obrador said the minimum wage in the northern strip of municipalities would rise to MXN $176 pesos, nearly double the national level, starting on January 1, and that fuel prices would be set on a par with U.S. prices.

“This is a very important project to boost investment and job creation,” López Obrador told business leaders.

The decree seeks to give an edge to northern Mexican businesses, which compete with U.S.-based companies across the border.

The plan will give businesses in the region tax credits worth 50% of VAT dues. Companies that can prove they earn more than 90% of their revenue in the area are eligible for an income tax credit worth one-third of dues.

Last month, Citigroup economists estimated lower tax revenue from the north could cost the government around MXN $120 billion a year.

The national chamber of business owners, Coparmex, welcomed the decree in a statement as a “judicious” measure that could spur investment in the region.

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