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Aaron+

Jan 3, 2014, 12:55 PM

Post #1 of 14 (3001 views)

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Surprises in the latest "reforms"

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Mexicans awoke in 2014 and are starting to bump against all the new "ajustes" (should read "incrementos") in prices, some expected, and some a surprise to many.

While the imposition of the 16% IVA tax on pet food and the increase from 11% to 16% in border states (plus Quintana Roo) were well publicized, as was the tax on soda pop, an apparent surprise was the 8% tax on sweet products that includes sweet breads/rolls and the like. (Many expect that pet abandonment, already a serious problem, will only increase as pet owners shed pets to avoid the higher costs of feeding them.) Nor did many realize that intercity buses would incur the 16% IVA tax on tickets, a serious imposition on laborers traveling from distant pueblitos to jobs or possible day jobs in the towns and cities.

January 1 also produced a major shock in fuel costs, with a higher than usual increase in the cost of gasoline and diesel, plus the imposition of a new "ecological" tax, though not clear what benefits will accrue to the ecology.

Industries incur a 1.2% increase in electric rates, with an increase also in the highest, "unsubsidized" domestic rate. Campesinos have lost a minor but significant discount in rates charged for driving irrigation pumps. Otherwise, it is not at all clear yet to the public whether the new "reform" eliminates other "subsidies" for electric rates -- an elimination proposed in the early December 2013 version of the Mexican Senate´s energy "reform" bill. I for one would like to see a breakout of the costs CFE has owing to its ineffeciences, corruption, as well as massive thefts of electric power countrywide.

Rents, housing unit sales (for purchases under 3.5 million pesos), and school tuition were among the early targets of federal taxation that escaped from Hacienda's grasps.

Hacienda and most Mexican politicians appear indifferent to a byproduct of the new tax regimen's insistence that Mexican businesses at all levels provide electronic invoices to their customers and electronically submit same to Hacienda's SAT, namely the many who will suffer irreparable loss of income. In Mérida, a retail business association expects about 1,300 very small businesses in the city, out of about 13,000 registered businesses, to be forced out of business as they have no computer capability; principally among this are many small stores runs by elderly owners who already are challenged by CFE bills for their meager lighting.

Meanwhile, Mexican television continues to carry happy face propaganda from the federal government promising, contrary to fact, fuel and electricity rate reductions, with the unstated but implicit promise that such will be soon forthcoming. Commentators in the press, however, expect that any such benefits will be far down the road, well beyond the three years some officials point to.



Gringal

Jan 4, 2014, 6:53 AM

Post #2 of 14 (2905 views)

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Re: [Aaron+] Surprises in the latest "reforms"

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Has any government known to modern society ever really cared what happens to the "little guy"? The most egregious item in the new legislation, IMO, is the insistence on electronic processing of purchases.
This hits the small business owner the hardest and indeed, will put many out of business. This will only benefit the large retailers. Is it possible that this was the purpose? Hmmm. Walmart or else? Follow the money.


citlali

Jan 4, 2014, 7:26 AM

Post #3 of 14 (2891 views)

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Re: [Gringal] Surprises in the latest "reforms"

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I think those covers the expenses that can be deducted..so the little guys will continue to be cash only and no facturas so their stuff will not be able to be deducted..This may drive some people to only do business with people who can handle facturas but if the little guy price is way loer that may not affect him and I am sure a system will come up to go around the system..


geoffbob

Jan 4, 2014, 8:43 AM

Post #4 of 14 (2870 views)

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Re: [Gringal] Surprises in the latest "reforms"

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Has any government known to modern society ever really cared what happens to the "little guy"? The most egregious item in the new legislation, IMO, is the insistence on electronic processing of purchases.
This hits the small business owner the hardest and indeed, will put many out of business. This will only benefit the large retailers. Is it possible that this was the purpose? Hmmm. Walmart or else? Follow the money.


History is replete with ironic twists having to do with fervent aspirations on the part of governments to help the little guy. I will always remember the utterly sincere and fiery intensity of Sergei Eisenstein's Russian film classic Potemkin which instilled in me an everlasting and utter disdain for Faberge diamond encrusted eggs. In hindsight it's not so difficult for me to think that, human nature being what it is, good intentions are no guarantee of good results. The noblest of aspirations have at times manifested themselves in moral inversions and suffocating spiritual gulags.

I've been in countries where the giant sucking sound is the sapping of the economy by what is called the informal market. Off the books economies can seriously harm the little guy. This phenomenon was extensively written about in the case of Peru. I'm willing to entertain the idea that this month's biting price rise and compulsory computer reporting of sales ought not be summed up out of hand as yet another cozy arrangement with Walmart.

Mightn't it be worth considering for a brief, glorious moment the possibility that these steps are well intentioned if amazingly ham handed and short-sighted? Regularizing the reporting of income as an ideal in itself would greatly help so many of our Latin American partners; I would argue especially the little guys. Gringal's point that the required computerized infrastructure and familiarity with it isn't firmly in place for this is well taken. Couple that with the fact in so much of Latin America the little guy believes with all his heart and soul that the game is rigged and perverted from the top echelons. Is there world enough and time to sort it all out? Oh well, at least I'm reliably informed that the city of Monterrey has lots of Ferrari dealerships. Hey wait a sec, isn't that sort of analogous to Faberge eggs? Doh!


(This post was edited by geoffbob on Jan 4, 2014, 9:02 AM)


addtocart

Jan 4, 2014, 9:19 AM

Post #5 of 14 (2852 views)

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Re: [geoffbob] Surprises in the latest "reforms"

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Oh well, at least I'm reliably informed that the city of Monterrey has lots of Ferrari dealerships.

Monterrey, California, maybe. A quick Google search reveals one Ferrari dealership in Monterrey, Mexico.


geoffbob

Jan 4, 2014, 9:24 AM

Post #6 of 14 (2851 views)

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Re: [addtocart] Surprises in the latest "reforms"

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Only one? The same type of thing happened to me once before. I moved to Casablanca for the waters. Imagine my chagrin at finding out there are no waters. I was misinformed.


(This post was edited by geoffbob on Jan 4, 2014, 9:28 AM)


Gringal

Jan 4, 2014, 10:26 AM

Post #7 of 14 (2830 views)

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Re: [geoffbob] Surprises in the latest "reforms"

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To clarify, I believe this may originally have been intended as a way to collect a fair share of taxes from the immense underground economy, but in fact, it will probably drive even more merchants "underground". Also, strictly IMO, one would have to be somewhat naive to believe the influence of large retailers had nothing to do with the legislation.

Back in the states, with particular reference to the State Board of Equalization in CA, craft fairs were regularly visited by ...uh..."representatives",(spies?) not in a visible official capacity, to check on whether sales tax was being added to purchases. Then, those crafts persons' reports were flagged to see if sales tax was reported.
This happened to people I knew. The Tax Man's efforts were indefatigable. Perhaps those methods, though odious to some, might be more effective than this legislative exercise in futility.


esperanza

Jan 4, 2014, 11:10 AM

Post #8 of 14 (2816 views)

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Re: [Aaron+] Surprises in the latest "reforms"

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Mexicans awoke in 2014 and are starting to bump against all the new "ajustes" (should read "incrementos") in prices, some expected, and some a surprise to many.

While the imposition of the 16% IVA tax on pet food and the increase from 11% to 16% in border states (plus Quintana Roo) were well publicized, as was the tax on soda pop, an apparent surprise was the 8% tax on sweet products that includes sweet breads/rolls and the like. (Many expect that pet abandonment, already a serious problem, will only increase as pet owners shed pets to avoid the higher costs of feeding them.) Nor did many realize that intercity buses would incur the 16% IVA tax on tickets, a serious imposition on laborers traveling from distant pueblitos to jobs or possible day jobs in the towns and cities.

January 1 also produced a major shock in fuel costs, with a higher than usual increase in the cost of gasoline and diesel, plus the imposition of a new "ecological" tax, though not clear what benefits will accrue to the ecology.

Industries incur a 1.2% increase in electric rates, with an increase also in the highest, "unsubsidized" domestic rate. Campesinos have lost a minor but significant discount in rates charged for driving irrigation pumps. Otherwise, it is not at all clear yet to the public whether the new "reform" eliminates other "subsidies" for electric rates -- an elimination proposed in the early December 2013 version of the Mexican Senate´s energy "reform" bill. I for one would like to see a breakout of the costs CFE has owing to its ineffeciences, corruption, as well as massive thefts of electric power countrywide.

Rents, housing unit sales (for purchases under 3.5 million pesos), and school tuition were among the early targets of federal taxation that escaped from Hacienda's grasps.

Hacienda and most Mexican politicians appear indifferent to a byproduct of the new tax regimen's insistence that Mexican businesses at all levels provide electronic invoices to their customers and electronically submit same to Hacienda's SAT, namely the many who will suffer irreparable loss of income. In Mérida, a retail business association expects about 1,300 very small businesses in the city, out of about 13,000 registered businesses, to be forced out of business as they have no computer capability; principally among this are many small stores runs by elderly owners who already are challenged by CFE bills for their meager lighting.

Meanwhile, Mexican television continues to carry happy face propaganda from the federal government promising, contrary to fact, fuel and electricity rate reductions, with the unstated but implicit promise that such will be soon forthcoming. Commentators in the press, however, expect that any such benefits will be far down the road, well beyond the three years some officials point to.

Nothing in the 'reforms' was hidden and nothing was glossed over. Everything, including the new tax on high-calorie foods, was well-publicized and thoroughly covered by TV, newspapers, and other media. If there is a part of the 'reforms' that someone did not know, it is due to the failure of the individual to inform him or herself.

Furthermore, new taxes (for example, at a tianguis or in a panadería) will not be a separate charge at the cash register. The new taxes will be incorporated into the cost of the item--buyers will simply think the cost of said item has gone up.

At least one business (+Kotas) has advertised that it will NOT charge the new 16% IVA on pet foods until after January 31. The advertising specifically says that offer does NOT include Royal Canin products.

The discussion in this thread about the 'reforms' is naive at best. The government did not make these reforms to help the little guy. The government made these reforms to line its own pockets.

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richmx2


Jan 5, 2014, 1:47 AM

Post #9 of 14 (2702 views)

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Re: [citlali] Surprises in the latest "reforms"

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Not so... my friend the hot dog vendor isn't quite sure how he's going to deal with electronic facurization. Like other micro-businesses, he's gonna have to depend on another vendor to handle the facturas from his suppliers and for his bulk purchases. The only people cheering this are the accountants.


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YucaLandia


Jan 5, 2014, 5:57 AM

Post #10 of 14 (2673 views)

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Re: [richmx2] Surprises in the latest "reforms"

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I'm curious: The facturas are only required for purchases of $200 pesos where the buyer wants a factura to claim the expense as a tax deduction. How many hot dog eaters require a factura when buying a hot dog - to deduct the hot dog cost on their taxes?

The hot dog seller would require that his hot-dog distributor and bun distributor give him facturas for the supplies. If the vendor buys their supplies at a tienda, the tienda would need to supply facturas to allow the hot dog seller to deduct his expenses.

A friend also described some special accounting/tax program operated through the banks for our local small vendors out at Progreso (where lots of small vendors sell stuff to cruise boat passengers), where the little vendors do not have to use accountants - instead they just make their deposits at a bank through some special taxing program operated by the banks - but it was not clear to me how they document their expenses...

I don't know the specifics of this program, but according to small vendors in Progreso, they will not have to provide facturas on typical small sales. ???
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E-visit at http://yucalandia.com

(This post was edited by YucaLandia on Jan 5, 2014, 5:58 AM)


Aaron+

Jan 5, 2014, 9:17 AM

Post #11 of 14 (2627 views)

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Re: [esperanza] Surprises in the latest "reforms"

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Ezperanza writes, in part,
"Nothing in the 'reforms' was hidden and nothing was glossed over. Everything, including the new tax on high-calorie foods, was well-publicized and thoroughly covered by TV, newspapers, and other media. If there is a part of the 'reforms' that someone did not know, it is due to the failure of the individual to inform him or herself.

"Furthermore, new taxes (for example, at a tianguis or in a panadería) will not be a separate charge at the cash register. The new taxes will be incorporated into the cost of the item--buyers will simply think the cost of said item has gone up....

"The discussion in this thread about the 'reforms' is naive at best. The government did not make these reforms to help the little guy. The government made these reforms to line its own pockets."

- - - - - -

Am so glad Ezperanzo has followed the munutia of the Hacienda "reforms" and seems to have a better grasp on what was coming than many commentators in the Mexican media, let alone the average, less thorough reader. (Then of course there are the many who do not follow any serious news sources for various reasons.) I saw reports of folks being surprised, for example, by the 8% tax on sweet rolls and the like. The 8% imposition itself was a change from an earlier reported proposal to slap a 20% tax on densely sugary products. Some reports came out in the popular press just a few days prior to the imposition of the new tax, such as the so-called "ecological" tax on fuels. I read the local SIPSE daily (Millenia Novedades) and (online) Excelsior (Mexico City) rather dilegently, listen to discussions on the IMER and the local university radio stations, and have not had Ezperanzo's success in figuring out the actual content of many of the reforms, including the Hacienda and energy "reforms."

As for IVA hidden within the price to the consumer, so that the consumer does not know the government's take, I do not see where anyone said that IVA would be charged separately at the cash register level. However, where we shop, supermarket receipts, for one, break out the total IVA charge (not item by item) as part of the total sum.

Amazing that Ezperanza can so know all the elements of the reforms when he cannot recognize that we are not being "naive" in expecting that such reforms would help the little guy. The comments appear to me to be saying that, contrary to the GOM's claims in paid advertising, the reforms are clobbering the little guy. Are not we all agreeing that the GOM imposed all such "ajustes" to line its pockets? And I have heard and read quite a few folks laughing at GOM ads talking about "our PEMEX" as if PEMEX ever benefited the population.

------------------------

As for Yucalandia and any $200 peso minimum for issuing a factura, the merchant still has to report his/her sales to SAT via computer. Apparently the electronic factura issue does affect the small stores, or the association for small merchants in the state of Yucatan does not know what it is talking about in claiming ruin for 1,300 of the 30,000 such registered units in the state (not in city, a confusion in the original article I read). (Hacienda notes that merchants, etc., do not need to hire an IT or CPA firm to issue facturas to customers or reports to Hacienda's SAT, rather the merchant can enter and print from SAT's own website, all of which, again, assumes computer and Internet capabilities on the part of small shop owners and any employees.)


Rolly


Jan 5, 2014, 9:29 AM

Post #12 of 14 (2619 views)

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Re: [Aaron+] Surprises in the latest "reforms"

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Aaron, FYI, Ezperanza is a lady who has lived in México for 30+ years..

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AlanMexicali


Jan 5, 2014, 9:36 AM

Post #13 of 14 (2615 views)

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Re: [Rolly] Surprises in the latest "reforms"

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Aaron, FYI, Ezperanza is a lady who has lived in México for 30+ years..


I have seen the federal gov´ts ads on TV about the Jan. 1st. taxes on sweets and all products containing excessive amounts of sugar and they were well done and easy to understand. For people to be surprised I would assume they do not own a TV.


(This post was edited by AlanMexicali on Jan 5, 2014, 9:37 AM)


Bennie García

Jan 5, 2014, 9:51 AM

Post #14 of 14 (2602 views)

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Re: [Aaron+] Surprises in the latest "reforms"

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There are mechanisms in place to ease the former REPECO filers into the new system. I am not going to argue whether they will reduce the burden on PYMES as they transition to the new scheme but there was some thought put into it.

The small business people will be given a year to fully comply with the new procedures under the Régimen de Incorporación Fiscal. Some will not have to issue electronic invoices for each transaction. They will be allowed to do one general invoice that accounts for all sales at certain intervals, such as once a week or once a month etc.

They will also pay no ISR the first year and their ISR obligation will be assessed on a sliding scale for a period of 10 years until they finally pay the full amount.

There are a lot of details that the mainstream media doesn't cover or covers very lightly. So for someone to claim in depth knowledge because they read the paper or listen to the news is a little naive.
 
 
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