Mexico Businesses Threaten to Stop Paying All Taxes Over Covid19

Mish

Mexican businesses are upset that all the Covid19 tax relief is going to individuals and small business loans.

President Andres Manuel Lopez Obrador refused to promise fiscal aid to companies affected by Covid19 shutdowns. Instead, the president focused his economic response on aid programs to the poor and small businesses loans.

A Tax Revolt Threat followed.

Mexico’s president is facing threats from some state business chambers to withhold taxes to protest the government’s refusal to provide aid to offset the impact of the lockdown, Reforma reported on Sunday.

Business chambers in the states of Tamaulipas, Durango and the beach resort of Acapulco are demanding tax deferrals, Reforma said. Mauricio Olguin, who leads Durango’s Conaco group, said his 18,000 members would stop paying all their taxes if the government didn’t provide breaks during 2020.

The protests by business groups follow complaints by governors from the states of Nuevo Leon, Tamaulipas, Coahuila and Jalisco, who claim their states’ economic activity accounts for a bigger share of federal tax revenue than they get back from government transfers.

Jalisco Governor Enrique Alfaro threatened to pull out of an agreement to provide tax revenue if the concerns of businesses were not heeded, daily El Universal reported on Saturday.

What's Mexico to Do?

How about, free money for everybody?

But what would that do to the Mexican Peso?

This setup explains why Mexico would not agree to the oil cuts demanded by Saudi Arabia in the oil deal just reached.

For discussion, please see After Years of Bickering a Meaningless OPEC Deal Reached

Lost in the Art of the Deal is the fact that the US is cutting more than its fair share.

Regardless, I strongly question if 10 million barrels is even enough to do much more than stabilize the price at some low level.

Mike "Mish" Shedlock

Comments (25)
No. 1-7
Sechel
Sechel

I think you have the story wrong. A few businesses may be making such calls but the story as I'm reading it is about Mexican states calling for a rewrite of the 1978 pact where sales and oil taxes go to the central government but then states getting 90% back in the form of transfers.

This is playing out all over the world. Rich states that contribute more of the money want to keep more of the money. they see the President as being weak and vulnerable right now and are attempting a power grab. Business leaders are also asking for help but the main issue is states will receive less money in 2020 than the year before.

You are framing the story in a narrative that speaks to your issues but those are not the issues driving this in Mexico so much. But yes the President is insisting on boosting aid to individuals and small business big business not so much Of course many insist the United States should not be bailing out large businesses either such as our airlines and Boeing.

JonSellers
JonSellers

I see bailing out individuals as the same thing as bailing out good businesses. The money going to individuals will flow to the businesses providing the most value to the market. Those businesses that provide little value won't see that cash flow and will go the way they should go.

Any bail-out of businesses is always the government picking winners.

Realist
Realist

The US, like many other countries, is trying to figure out who gets a bailout, tax relief, support, etc, and who doesn’t. It is an impossible task and those who yell the loudest, or have connections, will be the chosen ones.

With that in mind, I wonder about the US meat processing businesses. Many of them are shutting down because of unusually high levels of Covid19 outbreaks among the staff in this industry. Being an important part of the food chain, I suspect that they would be high on the list of bailout candidates.

Though, my bigger concern, is why are workers in this industry being infected at such high levels? I imagine someone will study this in detail.

For example, the Smithfield pork processing plant in Sioux Falls, S Dakota, is shut down as 240 of their 3700 employees are infected. That’s 240 out of the 430 cases in the entire state from one plant. Seems rather odd.

frozeninthenorth
frozeninthenorth

I spent a good chunk of my year living in Mexico (work and pleasure) most of the time is in the Yucatan (both Merida and Cancun) and one thing that was often mentioned (in the region -- which is governed by the non-AMLO pary) is that AMLO slowed the Cuvid-19 process to make sure that taxpayers would pay all their taxes by the end of March...

The reason is that the Yucatan has been in lockdown for nearly one month, with all restaurants, businesses, beach towns and beaches shut to everyone (including those who own a beach house there).

Again this is Mexico, and rumors are a way of the world there, still, AMLO only started taking Covid-19 seriously after March 31st...

The fundamental problem is that AMLO has a very classical view of the world (and little exposure to the rest of the world), he's like a mini-Trump in his views -- "Mexicans are strong and will not get Covid-19", "those who take "time off" are lazy" and deserve what they get!

Its not hard to get these statements -- AMLO has a "press conference" every morning where he goes of on tangents worthy of the "Two Ronnies" since these press conferences have a tendency to last for up to two hours.

He has always taken the view that its all in the best interest of the nation: Cutting all daycare (to zero), shutting down all women shelters, cutting all medication to public hospitals, cutting salaries to doctors in public hospitals. There are no stop gaps there are no solutions -- ever! He believes that his "4th Transformation" is worth all the pain. So his view of the covid-19 is similar to that of Trump in the early days; "its a fix created by my enemies" seriously he's said that on a number of occasions.

Anyway, aside from giving money away -- since most Mexican production is for export markets, helping Mexican companies is probably not worth the effort since it's their markets that have been decimated.

On the other hand, he doesn't appear to want to help the people either.

It is truly amazing to see two North American countries behave so stupidly with grave consequences for their citizens. American has more than 25,000 dead so far (Canada with 1/10th of the population has 700) Mexico is not reporting deaths so no one will know how bad it will get, but since social distancing has only been in place for a few weeks...one can imagine it will get very very bad there too.

Enough rambling for an Easter Monday morning

ohno
ohno

While we're at it, the FED can start funding counties and end property taxes. Exactly what are taxes when all this crap is contrived on a keyboard anyway? You give me some, then you want something back that's bs anyway. Nothing more than control. Cant have the slaves get too far ahead. The idea the deficit is too big is certainly out the window.


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