The economic package for fiscal year 2014 was submitted on September 8, 2013 and included a social security and tax reform proposal that would result in various amendments to social security and tax law.
The reform is based on six fundamental points:
- Encouraging development and stability
New ecological taxes are added such as special taxes on the use of fuel containing carbon and on pesticides. A tax on sugar-sweetened beverages is also proposed.
Another proposal is to align the tax framework of government charges for the use of federal resources with international standards on mining, water and the radio-electrical spectrum.
- Improving tax system fairness
It is proposed to eliminate various preferential treatments such as the consolidation regime, accelerated depreciation of investments, simplified tax treatment, cooperative production regime, sales on credit, deduction for restaurant meals, and deduction for related party transactions in specific situations.
It is also proposed to increase the income tax to rate to 32% for individuals when their annual income exceeds Pesos $500,000; and to introduce a charge of 10% on transfers of publicly-traded stocks, as well as an additional tax.
A limit on personal deductions by individuals would be set at not more than the lesser of two minimum wages per year and 10% of the taxpayer’s gross income.
The 0% rate on food and medicines would not change; however, certain VAT preferential treatments would be deleted, for example, the 16% VAT rate would apply throughout the country and VAT exemptions for private schooling, mortgage interest payments, and temporary imports would be repealed.
- Simplifying compliance with tax obligations
It is proposed to eliminate the single rate business tax and cash deposit tax but enact a new Income Tax Law that would simplify the payment of taxes, eliminating almost entirely preferential regimes and special treatment.
- Promote formality
The creation of two systems for small businesses (annual income up to Pesos $1,000,000): one for taxes and one for social security. The first would offer incentives such as reductions on payment of taxes during the first years of participation and the second, reductions in social security contributions while being able to enjoy all benefits, including new unemployment insurance and retirement pension plan benefits.
- Strengthening tax federalism, giving incentives for state tax collection
New incentive plans are to be created to strengthen state tax collection and make transparent the allotment of federal funding.
- Strengthening PEMEX, providing it with a modern tax system
It is intended to provide PEMEX with a regime system similar to that of any other company.
Based on the foregoing, it is intended to increase public revenue to 1.4% of gross domestic product for 2014 and up to 3% for 2018.