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This week I went into my favorite  furniture store and surprised to see the following sign on the pay desk;

IF YOU NEED FACTURA, 16% WILL BE ADDED TO YOUR TOTAL!!!!

Knowing that there is a huge "gray economy" in Mexico, and the government has problem's collecting taxes , I can understand the reasons for the woeful condition of the infrastructure, general health and education, and the list goes on and on. 

So I got to thinking how many more of the goods and services people/stores we are doing business  are not paying the 16%IVA. Is your favorite restaurant really  passing on to the tax man the amount the owner say's is included on the bill. Should we worry?

A couple of months ago I went to see my orthopedic guy for knee surgery and told him I do not have insurance but I can pay cash, so what is your best prices...and he was willing to be complicit in my "crime"

But I think there are bigger moral issues at stake. There are many reasons for foreigners to relocated in MX, and I willing to bet the "low cost of living" figures into many/most of them.Well if "no body" is paying taxes, how does any government  provide for a decent health service, good schools etc etc? Do we bother to inquire "How do you achieve the low cost of living" Should we worry about paying slave wages, fixing the pot holes?

By default are we complicit and a hypocrite in this scheme of things......Are we patronizing when we  to rush to save the staving children and beggars..... when the answer is to pay IVA taxes (16%IVA) and MX's social ills will be resolved? Folks there is no free lunch ...can I/we slept soundly to night??

 

.

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I think a lot of people,  Mexican and expats, feel that the gov't is so curupt that the 16% will just go into someone's pocket and the people will see no changes 

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1 minute ago, Kyle said:

I think a lot of people,  Mexican and expats, feel that the gov't is so curupt that the 16% will just go into someone's pocket and the people will see no changes 

Polling shows that feeling is near universal among Mexicans.

 

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Keep in mind that as with all value-added type taxes, on a physical good, even if it is not "paid" at retail / by the final purchaser, that it is tracked and taxed, from the mfr to distrib to the retailer.      So at least the IVA has been paid on the wholesale part of it which may capture 70 to 80% or so of the final tax amount.

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I run a small business and while I pay IVA on many of the materials I use, unless someone wants a factura, which means they have to have a tax number, they are not charged IVA on my labor. I'm not doing anything wrong- in my tax category, because I earn under a certain amount a year, I don't have to charge or submit IVA on my earnings unless the client wants a factura. So don't be so quick to assume these businesses are cheating if you aren't familiar with the Mexican tax system.

When I lived in Canada, BTW, small businesses often asked me if I was paying by cash and if I needed a receipt, and if it was cash with no official receipt, often didn't charge the GST. So yes, they weren't reporting those sales or paying taxes on them.

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37 minutes ago, mudgirl said:

I run a small business and while I pay IVA on many of the materials I use, unless someone wants a factura, which means they have to have a tax number, they are not charged IVA on my labor. I'm not doing anything wrong- in my tax category, because I earn under a certain amount a year, I don't have to charge or submit IVA on my earnings unless the client wants a factura. So don't be so quick to assume these businesses are cheating if you aren't familiar with the Mexican tax system.

When I lived in Canada, BTW, small businesses often asked me if I was paying by cash and if I needed a receipt, and if it was cash with no official receipt, often didn't charge the GST. So yes, they weren't reporting those sales or paying taxes on them.

You run a small business in Mexico ?

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4 hours ago, lakeside7 said:

This week I went into my favorite  furniture store and surprised to see the following sign on the pay desk;

IF YOU NEED FACTURA, 16% WILL BE ADDED TO YOUR TOTAL!!!!

Knowing that there is a huge "gray economy" in Mexico, and the government has problem's collecting taxes , I can understand the reasons for the woeful condition of the infrastructure, general health and education, and the list goes on and on. 

So I got to thinking how many more of the goods and services people/stores we are doing business  are not paying the 16%IVA. Is your favorite restaurant really  passing on to the tax man the amount the owner say's is included on the bill. Should we worry?

A couple of months ago I went to see my orthopedic guy for knee surgery and told him I do not have insurance but I can pay cash, so what is your best prices...and he was willing to be complicit in my "crime"

But I think there are bigger moral issues at stake. There are many reasons for foreigners to relocated in MX, and I willing to bet the "low cost of living" figures into many/most of them.Well if "no body" is paying taxes, how does any government  provide for a decent health service, good schools etc etc? Do we bother to inquire "How do you achieve the low cost of living" Should we worry about paying slave wages, fixing the pot holes?

By default are we complicit and a hypocrite in this scheme of things......Are we patronizing when we  to rush to save the staving children and beggars..... when the answer is to pay IVA taxes (16%IVA) and MX's social ills will be resolved? Folks there is no free lunch ...can I/we slept soundly to night??

 

.

Gringo guilt!!!!

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3 hours ago, TelsZ4 said:

You run a small business in Mexico ?

 I was talking about the Mexican tax system and IVA and what I have to do to comply, so obviously I was referring to my small business in Mexico. 

I didn't say I don't pay taxes on my profits, I do, but that's different than being required to charge IVA.

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45 minutes ago, mudgirl said:

 I was talking about the Mexican tax system and IVA and what I have to do to comply, so obviously I was referring to my small business in Mexico. 

I didn't say I don't pay taxes on my profits, I do, but that's different than being required to charge IVA.

You may be well informed about the Mexican tax system, I am not, it wasn’t obvious to me who’s tax system you were referring to. I was asking a general question. 
I didn’t ask if you were paying taxes so I don’t see why you felt it necessary it tell us that you do pay taxes.. Posting “The Mexican tax system” would have sufficed.

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8 minutes ago, TelsZ4 said:

I didn’t ask if you were paying taxes so I don’t see why you felt it necessary it tell us that you do pay taxes.

Because the majority of ex-pats don't run businesses here and therefore don't know how the taxation works for that, as you said you didn't. I wanted to make it clear that just because a business doesn't charge or pay IVA doesn't mean they aren't declaring their earnings and paying taxes, which was the implication in the topic post. 

So while I quoted your post in order to answer your question, my response was not solely intended for your benefit.

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3 hours ago, mudgirl said:

 I was talking about the Mexican tax system and IVA and what I have to do to comply, so obviously I was referring to my small business in Mexico. 

I didn't say I don't pay taxes on my profits, I do, but that's different than being required to charge IVA.

Impuesto al Valor Agregado (IVA) is a VAT or sales tax

Impuesto Sobre la Renta (ISR) is an  income tax.

Both are collected by the SAT which is the equivalent of the IRS in the US.

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8 hours ago, Kyle said:

I think a lot of people,  Mexican and expats, feel that the gov't is so curupt that the 16% will just go into someone's pocket and the people will see no changes 

And, if the government is chronically short of money, because people find ways to shirk their taxes, you will also see no positive improvements. This is a circular argument that ends up being a little too convenient for those who just don't want to pay taxes.

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20 minutes ago, cookj5 said:

And, if the government is chronically short of money, because people find ways to shirk their taxes, you will also see no positive improvements. This is a circular argument that ends up being a little too convenient for those who just don't want to pay taxes.

You have to understand how IVA works. If you go into a store to buy a fridge, the store owner has already paid IVA on that item to the manufacturer. If that store owner says if you don't need a factura, you don't have to pay IVA, it doesn't mean he isn't paying taxes on his sales. It means that because he isn't charging you IVA, that he remains the one who paid the IVA on that fridge. If he issues you a factura including IVA, he then has to pay that IVA he collected from you to the tax dept. But he can also deduct the IVA he paid to the manufacturer on that fridge. IVA is a tax that starts at source, and is passed along to the end user, who is either the seller or the customer. IVA doesn't get paid more than once on an item, no matter how many times it changes hands.

Now sure, there could be business owners who aren't declaring the sale of that fridge at all, but as a business owner, you can't simply not declare any of your earnings because all your customers pay in cash. The tax department would wonder how you were able to stay in business if you didn't earn any money and would investigate.

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The SAT or the collectors of the taxes aren´t the problem, it all goes to the federal government for budget distribution.  It´s when it gets distributed back to the states and local governments is when and where the mismanagement, waste, and corruption becomes the problem.

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1 hour ago, Willie said:

Speaking of paying taxes....I wonder how many are reporting their rental income to the government?  Locals and foreigners.....

Well IVA is due only if you are renting a furnished house.  One reason an unfurnished house is cheaper.  Not sure about income tax on profit. I am sure its due.

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Many businesses now ask for facturas when they buy from their suppliers because it allows them to deduct their expenses .. If they do not then they cannot claim their expenses, Each business man can decide what he or she wants to do..Right now I get a lot of phone calls from artisans who wonder how to give  facturas so things are changing

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Things are changing with the increased use of credit/debit cards. When a card is used for payment that money cannot be hidden. Not that I think business people have to worry about being audited like we do NOB.

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2 hours ago, TelsZ4 said:

Not that I think business people have to worry about being audited like we do NOB.

Perhaps not to the same extent, but don't be so sure about that in general. Many years ago I had a rep from the Mexican tax dept. show up at my shop. He said their records showed I had a missing tax payment. Now at that time, the taxes due for a small business were a flat fee of 200 pesos every 2 months (that changed several years ago). I knew I hadn't missed any payments, but what had happened when I checked my records is that I had had an accountant when I first set up my business, who dealt with my reporting and payments. After paying her for a year, I realized that I could do myself what she had been charging me $500 pesos for ( not to mention having to bring in all my receipts and payments and sit in her waiting room for 15-20 minutes each time)in about 3/4 of an hour, so I stopped using her and do the reporting myself now.

She simply hadn't remitted my last payment, even though I had given her the money.

Anyway, I showed the guy who showed up at my shop the receipt that I had give the accountant the money, then I asked him, "They really sent you all the way here, a 2 hour round trip, plus about 100 pesos in gas, because of a missing 200 peso payment? The tax dept spent more money sending you here than what I owe."  He thought that was pretty funny and ridiculous, too, and we had  good laugh over it.

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17 minutes ago, mudgirl said:

Perhaps not to the same extent, but don't be so sure about that in general. Many years ago I had a rep from the Mexican tax dept. show up at my shop. He said their records showed I had a missing tax payment. Now at that time, the taxes due for a small business were a flat fee of 200 pesos every 2 months (that changed several years ago). I knew I hadn't missed any payments, but what had happened when I checked my records is that I had had an accountant when I first set up my business, who dealt with my reporting and payments. After paying her for a year, I realized that I could do myself what she had been charging me $500 pesos for ( not to mention having to bring in all my receipts and payments and sit in her waiting room for 15-20 minutes each time)in about 3/4 of an hour, so I stopped using her and do the reporting myself now.

She simply hadn't remitted my last payment, even though I had given her the money.

Anyway, I showed the guy who showed up at my shop the receipt that I had give the accountant the money, then I asked him, "They really sent you all the way here, a 2 hour round trip, plus about 100 pesos in gas, because of a missing 200 peso payment? The tax dept spent more money sending you here than what I owe."  He thought that was pretty funny and ridiculous, too, and we had  good laugh over it.

Jaja! Beauty!!!

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Great topic!!!!!!

 

I have 2 examples with regards to IVA and prices for goods in mexico.

Many years ago when the peso was at 12.56 per dollar and i needed tires for my truck.. i was shocked to see the mud wrangler tires at 4,700 pesos each

I we t here a d i went there and tried to find an affordable brand tire...  i sent an email to the sams or costco mexico regional manager (business contact) and requested a bfgoodridge mud terrain km2 tire...  he gave me a quote of 2,500 each.. sold.. i said i take those and waited the 2 weeks... basically it was about 199.00 per tire that was the usa market price..  was even happier when the tires showed up and they were the E load that cost 242.00 in the usa

 

The other example was while in the usa i went to sears and bought a kitchen aid cake mixing machine for a family here in mexico.. cost 250.00 dollars....  while in gdl malls i saw the same machine for 500.000 dollars in pesos.. i was shocked and asked hiw many machines they sell per month...  even though they had the 72 months no interest plans

Last year talking about prices etc in mexico...  an industry insider explained that eveytime the product is moved from the border to the central warehouse to distributor.. they charge IVA and thats one of the reasons all the products are so expensive.

 

The mercedes that costs 86,000 dollars in the usa..  sells here for 146,000

 

I am still confused wondering how a families household could benefit from paying regular prices and not the out of reach prices.

So i would not know what i would do at the furniture store...although if i could save $$$$  i would choose the better option

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