A new bill in Mexico calls for tax on purchases from digital platforms

The bill would be presented during the next regular session of Congress. If approved, the legislation would make purchases across digital platforms, including e-commerce, ride-hailing and home renting, subject to the standard 16% VAT charged on other purchases in Mexico

Amazon Offices / Reuters

Reuters | Stefanie Eschenbacher and Anthony Esposito

Listen to this article

 

A senior Mexican lawmaker plans to present a bill in Congress to tax purchases on Amazon, Uber and AirBnB and other digital platforms to help fill a multibillion-dollar revenue hole after changes in how state oil company Pemex contributes to government finances.

Leer en español: Un proyecto de ley en México busca gravar las compras en plataformas digitales

Alfonso Ramirez Cuellar, a member of President Andres Manuel Lopez Obrador's leftist National Regeneration Movement (MORENA) who chairs the budget committee in the lower house of Congress, told Reuters in an interview that applying Mexico's value-added tax (VAT) to purchases on the platforms would help balance the government's books.

"We believe applying VAT to purchases on the platforms is the best way to go about it. There are some very successful experiences with this in Latin America," said Ramirez Cuellar.

Asked whether the proposed legislation would cover the Mexican operations of Amazon.com Inc, Uber Technologies Inc and AirBnB Inc, some of the world's most successful technology companies, Ramirez Cuellar said it would.

He said the bill had not been written in consultation with the government but had the support of other lawmakers.

The Mexican finance ministry did not respond to a request for comment on whether the government would back the proposal. MORENA and its allies have a majority in the lower house of Congress.

If approved, Ramirez Cuellar said his legislation would make purchases across digital platforms, including e-commerce, ride-hailing and home renting, subject to the standard 16% VAT charged on other purchases in Mexico.

He said the bill would be presented during the next regular session of Congress, which runs from Sept. 1 through Dec. 15, and could become law by early next year.

A spokeswoman for Uber said the company would continue to meet its fiscal obligations and contribute to a possible tax reform in Mexico. She said it had collaborated with efforts to regulate the digital economy elsewhere in Latin America, including in Argentina, Colombia, Chile, and Uruguay.

Argentina last year began charging VAT on purchases made via digital platforms, including Uber. The rules there make the payment provider, rather than the digital platform itself, responsible for withholding and payment of the tax.

Ramirez Cuellar suggested a similar system of charging via payment providers could work in Mexico.

A spokesman for Amazon declined to comment while a spokesman for AirBnB did not respond to a request for comment.

In May, Uber and a host of other ride-hailing and delivery companies struck a deal with the Mexican government to withhold taxes from drivers' earnings.

FISCAL CHALLENGE

Ramirez Cuellar's committee faces the challenge of increasing tax revenues while sticking to the election promise of President Andres Manuel Lopez Obrador to not create new taxes.

Also read: US notes advance in Mexican migration enforcement 

That challenge was exacerbated last week when highly-indebted Pemex presented a business plan that reduced its tax burden by 11 percentage points to 54% by 2021, which would equal an estimated loss to federal revenues of $6.6 billion over the next two years.

That is good news for Pemex, which is under pressure from investors, but not so good for budget planners in Latin America's second-largest economy.

In line with Lopez Obrador's promises, Ramirez Cuellar argued the plan for a VAT on digital platform purchases would not constitute a new tax but something closer to a tax system reform.

In addition to taxing purchases on digital platforms, Ramirez Cuellar said the budget committee had also formed a working group that was exploring how to adequately charge companies, including Coca-Cola Co and Nestle SA, for their water usage.

In response to a query from Reuters Coca-Cola said: "In all our operations we conduct ourselves with strict observance of the law and we comply with our taxes and fees without any delays or current debts."

"We are fully committed to Mexico, therefore, we operate following best practices in water use and efficiency," the company said in an emailed statement.

Nestle did not respond to a request for comment.

Ramirez Cuellar also said the committee had been analyzing the possibility of increasing so-called vice taxes levied on alcohol, tobacco, and food the government deems unhealthy. "Tough conversations" with industry leaders on such possible measures have already been held, he said.