Mexico, which has one of the lousiest tax-collection rates around, is rolling out a deal with tech platforms.
Deputy Finance Minister Arturo Herrera did not elaborate when he confirmed the plans with Bloomberg News. The previous administration was in talks with Uber, Netflix and Airbnb to automate the tax collection process. The announcement is expected to reveal a conclusion to those negotiations.
The program wouldn’t create a new or higher tax but would automatically collect what drivers, viewers or hosts, should already be reporting and paying monthly. More than half of Mexico’s population works in the informal economy and doesn’t pay income taxes.
Herrera said that President Andres Manuel Lopez Obrador, who took office in December, should explain its policy decisions. The private sector invests 6.7 times the amount of the government, but investors were shocked when a US$13 billion airport project was scuttled. Mexican stocks, bonds and currency suffered.
“I think it’s on our side to make sure that we have a much more cohesive narrative so that we are able to send a clear message to the private sector,” said Herrera, who previously served as finance minister for Mexico City and worked at the World Bank. “For us to grow faster this year and in the years to come, we need a private sector that is confident and that is facing clear rules of the game, and we’re going to be working towards that.”
Airbnb in December stepped away from negotiations with Mexico that would have required the home-sharing website to collect income tax from its hosts and send the money to the government.
After a year of discussions, an agreement was close. The company was to give Mexico’s Finance Ministry a monthly report of taxpayer information and how much income each host generated. The company would also withhold a single-digit income tax, which it would remit to the government.
But the company saying it faced technical challenges, an unnamed source told Skift.
Mexico was simultaneously negotiating a similar deal with Uber, which resulted in a rule geared toward ride-hailing and food delivery services that rival Cabify also joined.
Sources: Bloomberg, Skift