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Carta Estados Unidos Videg.pdf

Carta Estados Unidos Videg.pdf

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Published by: Aristegui Noticias on Oct 17, 2013
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Doctor Luis Videgaray Caso Hon´ble Minister of Finance Government of Mexico Mexico City October 14th, 2013

By email and by courier Your Excellency, We are writing to you to express USCIB members’ concerns about recent tax developments in Mexico. We are concerned about the adverse impact on the Mexican and global business climate of a recent legislative initiative in Mexico. We refer to the provisions contained in the proposed Tax Bill presented to the Mexican Congress on the 8th September 2013. USCIB promotes open markets, competitiveness and innovation, sustainable development and corporate responsibility, supported by international engagement and prudent regulation. Its members include top U.S.-based global companies and professional services firms from every sector of our economy, with operations in every region of the world. With a unique global network encompassing leading international business organizations (USCIB is the U.S. affiliate of the International Chamber of Commerce and of the Business and Industry Advisory Committee to the OECD), USCIB provides business views to policy makers and regulatory authorities worldwide, and works to facilitate international trade and investment. Many of our members have significant investments in Mexico. Doing business around the world or even only between two countries creates the potential for double taxation resulting from conflicts between different domestic tax systems. Taking into account Mexico’s recent economic success, it is worth noting that some of the current tax reform proposals would seriously affect the country’s growth environment by adversely impacting many multinationals with major investments in Mexico. We are concerned that the recent proposals negatively affect the future of Mexico’s investment climate. Specifically, we are concerned with the following proposals:       No deduction would be allowed for related party payments abroad that are subject to an effective rate that is less than 75% of the Mexican corporate income tax rate. No deduction of payments that are also deducted abroad. Limitation of treaty benefits where there is no legal double taxation. Additional corporate-level tax on dividends at a rate of 10%. No deduction will be allowed to banks for loan loss reserves which for tax purposes exist at year end and for which no deduction has been taken for tax purposes even though the loan has been written off for book purposes. Deduction for tax-exempt salaries and benefits would be limited to 41% of such tax-exempt amounts.

     

The employee share of social security contributions (funded by the employer) would not be deductible. Pension fund contributions would not be deductible until paid to the employee. Existing tax consolidation regime would be repealed. Temporary imports under IMMEX and other similar programs would be taxed at the general VAT rate. Sales of goods located in Mexico, between foreign residents or between a foreign resident and a maquiladora, would be taxed at the general VAT rate (currently zero rated). Broad provision to re-characterize transactions pursuant to the Tax Code in case there is no quantifiable economic benefit for the taxpayer.

We understand that some specific provisions are intended to protect against undue erosion of the Mexican tax base. The OECD is undertaking an analysis to tackle perceived abuses that Mexico seeks to curb with this proposal and is analyzing measures to be implemented in the domestic laws which will be reviewed from a global perspective to prevent abuse and double taxation and promote competitiveness. The advantage of working through the OECD is that global solutions may be found that will minimize both double non-taxation and double taxation. Premature unilateral action has the potential to undermine global solutions and increase the potential for double taxation. In addition, many of these proposals also violate Mexico’s tax treaty commitments. The proposal denying a deduction for a cross border payment unless it is subject to an effective rate tax of at least 75% of the Mexican rate could, for example, apply to a payment that satisfies the arms length standard to a company with a NOL or that is subject to an effective tax rate of 22% (as would be the case in the UK, Ireland or Switzerland). Such a denial would constitute an unauthorized override of treaty commitments and more generally of the arms length principle. Therefore, we recommend that some of these measures should be postponed to allow a more adequate solution for investment based on international agreement. We would welcome the opportunity to discuss our concerns, and explore potential alternatives to help you address Mexico’s concerns, in more detail. Stable and predictable tax laws contribute to create an environment conducive to investments and will make Mexico a robust leader in the world. Sincerely,

Peter M. Robinson President and CEO United States Council for International Business

William J. Sample Chair, Taxation Committee United States Council for International Business

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