Latin America

Mexican Border Factories Worry About Losing Tax Break

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Mexico's Senate is set to pass a whole host of new taxes to boost the country's anemic tax collection. Among the many new taxes is one that will raise what maquiladoras pay for imported goods to the rate the rest of the country pays. Border communities are worried that losing their coveted tax break will lead to a flood of foreign companies leaving the region.


The Mexican Congress is close to passing a range of new taxes aimed at making up the country's budget shortfall. The new plan would raise taxes on everything from junk food and soda to the income of the country's top wage earners. Many industries have put up a fight against the new taxes, and foreign owned factories along the U.S. border have led the charge.

NPR's Carrie Kahn reports.

CARRIE KAHN, BYLINE: Hundreds of thousands of jobs depend on the foreign-owned factories set up along Mexico's border. They churn out everything from flat screen TVs and medical devices in Tijuana to auto parts and candy in Ciudad Juarez.

Industry officials say the new taxes put those jobs in jeopardy and hurt the region which is just recovering from years of drug violence that claimed thousands of lives. They fear the hikes will send businesses fleeing further south to cheaper Central America.

Thousands in Ciudad Juarez took to the streets last week to protest the plan, which calls for a hike in the sales tax from the preferential rate of 11percent along the border to 16 percent, what the rest of the country pays.

And the foreign owned factories will no longer be able to import raw materials duty free. The new plan does allow for the import tax to be refunded once the finished product is exported. But the companies complain that will be a lengthy and bureaucratic process.

Mexico has one of the lowest tax collection rates in the world just 10 percent of GDP. That's compared to 35 percent for most developed nations.

Carrie Kahn, NPR News, Mexico City.

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