Weekly Report - 20 September 2007 (INNS 1741-7422)

MEXICO | Fiscal reform approved. The lower chamber of congress passed a fiscal reform package on 13 September. The alliance between the ruling Partido Acción Nacional (PAN) and the Partido Revolucionario Institucional (PRI) held. The proposal now goes to the senate. The tax reforms approved by the lower chamber have four main elements. The first is the introduction of a flat rate tax, the Impuesto Empresarial a Tasa Unica (Ietu). This will be set initially at 16.5% rising to 17% in 2009 and 17.5% thereafter. The tax which will be levied on operating profits (gross sales less labour and input costs). The second is the gradual introduction of a new 5.5% tax on fuel over the next 18 months. This tax should yield M$22.7bn (US$2.02bn) which will go directly to states to spend. The other two elements are a tax on bank deposits over M$25,000 and a change to the way the state oil company Pemex is taxed that should allow it to retain more of its income.

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