Mexican Maquiladora Industry Cries Foul Over Taxes

By MARK STEVENSON

MEXICO CITY (AP) a¿¿ Industry groups say President Enrique Pena Nieto's proposed tax overhaul, expected to pass the Senate late Tuesday or early Wednesday, could strangle one of Mexico's economic success stories, the border factories known as maquiladoras.

Owners of the maquiladoras, which turn out everything from auto parts to candy for the U.S. market, argue that the plan would harm the border city of Ciudad Juarez just as it begins to recover from a three-year wave of brutal drug-gang killings.

"The businesses, the stores, the restaurants have just begun opening up again," said Claudia Troitino, head of the Ciudad Juarez maquiladora association. "The economy was just beginning to recover ... This will be a heavy blow."

It's one of numerous business sectors opposed to the tax proposal already approved by the lower house and a Senate committee. Mining companies, soft-drink bottlers and employer associations all protest tax hikes that supporters say are needed to strip some tax privileges away from the wealthy and help remedy deep income inequalities. The current tax code, for example, encourages business executives to create fleets of corporate jets to get tax deductions.

The legislation to raise taxes on businesses and top-end wage earners and end some deductions has drawn full-page ads and radio spots from opponents warning it will discourage investment.

But supporters point out that Mexico currently has a low tax collection rate of just 10 percent of GDP, far less than the average 34 percent among developed countries, leaving little for government social programs. They argue it would bring some social justice to Mexico's lopsided distribution of wealth.

"Seldom has there been such a blunt, undisguised campaign by private interests, a massive and virulent campaign against the tax reform," dozens of intellectuals wrote in an open letter to Congress this week. "Apart from the poor and those who can't meet their basic needs, what product, service, industry or company, corporate group or region deserves special privileges?"

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