Less than 1 percent of Mexican taxpayers take advantage of income tax deductions offered to them by the Impuesto Sobre la Renta (ISR) legislation, according to the head of the Servicio de Administracion Tributaria (SAT) Aristotle Nunez.
He explained in an interview with the newspaper El Financiero that anyone earning more than MXN400,000 a year is eligible to claim income tax deductions to cover certain expenses, such as the interest paid on a mortgage, the cost of tuition fees and major medical and hospital fees. Tax reform proposals are set to limit these expenses.
Other financial reforms proposed by the Mexican government include lifting the income tax rate for those earning more than MXN500,000 a year from 30 per cent to 32 per cent. However, Nunez was quick to clarify that the 32 per cent figure will only affect those earning above the MXN500,000 mark.
Proposals have also been made to add value added tax (VAT) to interest paid on mortgages, rather than on the mortgage itself. Meanwhile, a limit could be applied to the personal deductions each taxpayer can make every year, which would be either the equivalent of two annual minimum wage salaries (MXN47,000) or 10 percent of the taxpayer’s gross income, depending on which is lower.
Victor Barajas, a partner at the legal firm Basham, has said that these tax reforms are striving to improve growth and stability in Mexico, as well as ensuring that the tax system is fair.