VAT collection increased 11.5% driven by the domestic market

This is the highest growth rate for the Value Added Tax since 2014, in line with the trend of economic recovery; in the case of IEPS and ISR, the goal was not achieved. The recovery in the international price of oil, which led the Treasury to grant tax incentives to gasoline since February, affected income from special taxes

The collection of the Value Added Tax (VAT) from January to October of this year exceeded the expectations that the government had for the period, contrary to what happened with the income obtained from the Special Tax on Production and Services (IEPS ) and the Income Tax (ISR), according to the data released by the Ministry of Finance and Public Credit (SHCP).

In the October Report on Public Finance and Public Debt, the Ministry of Finance detailed that tax revenues totaled just over 2.9 trillion pesos, which meant an annual increase of 1.6 percent.

This increase was explained, to a greater extent, by the collection of VAT, a tax that is related to consumption. This tax left resources for 943,054 million pesos, 11.5% more than last year, and the highest growth rate for a similar period since 2014, when they grew 16.3 percent.

The increase in collection for this tax was due, according to the agency in charge of Rogelio Ramírez de la O, to the strengthening of the domestic market, this in line with the trend of recovery in the Mexican economic activity.

The oil revenues of the public sector registered a real annual growth of 64.3% with respect to the period January-October 2020 as a result, mainly, of the increase in the price of oil ”.

SHCP, report on public finances and public debt.

Also, the VAT exceeded the expectation that the government had. In the period, it collected 119,625 million pesos more than estimated, an amount greater than the 107,603 million pesos that the Ministry of Health spent in the period, for example.

Import taxes also showed significant growth, after last year they were negatively impacted by restrictions to contain Covid-19. From January to October they left 60,148 million pesos, 18.5% more compared to last year and they were 8,664 million pesos higher than expected.

The story was different for the IEPS, which left a collection of 343.108 million pesos, 14.5% less in annual comparison, and 83.306 million pesos below what was estimated for the period.

This was explained by the fall in the IEPS charged to gasoline, which contracted 24.6% annually due to the recovery of the international price of oil, which led the Treasury to grant fiscal stimuli, since last February, to avoid a greater impact on the consumer’s pocket.

In the case of ISR, this tax left the public treasury just over 1.5 trillion pesos, just 0.1% more compared to the same period in 2020 and 47.352 million pesos less than estimated.

Taxpayers contribute 62% of income

The Ministry of Finance highlighted that, so far this six-year term, taxpayers have contributed more than half of the budgetary income, thanks to improvements in the tax framework.

“Throughout the first three years of the six-year term, on average, tax revenues in January-October have represented 62.6% of total revenues, which shows less dependence in public finances on oil revenues, and improvements in the tax framework ”, highlighted the SHCP.

From January to October of this year, the budgetary income of the public sector totaled 4.7 trillion pesos, which meant an increase of 5.1% in annual comparison.

Since the arrival of Andrés Manuel López Obrador to the government, the Tax Administration Service (SAT), which is in charge of collecting taxes and reviewing taxpayer compliance with tax obligations, began with a more aggressive fight against tax evasion thanks to approved modifications, such as the elimination of universal compensation, criminal tax reform and the collection of taxes for profits on digital platforms, among others.

Likewise, a greater inspection of taxpayers began, especially those known as large taxpayers, for which companies such as IBM, América Móvil, BBVA, among others, reached agreements with the treasury to pay tax debts from past years.

Oil tankers grow 64.3%

In the case of the income obtained from oil, the Ministry of Finance reported that these were for 776,621 million pesos, 64.3% more than in the same period last year.

In addition, oil revenues exceeded by 2,325 million pesos what was forecast for the first 10 months of the year.

“The oil revenues of the public sector registered a real annual growth of 64.3% with respect to the period January-October 2020 as a result, mainly, of the increase in the price of oil. In the interior, the revenues of the federal government and Petróleos Mexicanos showed real annual increases of 33.2 and 85.3%, respectively ”, highlighted the agency.

Last year, in the face of mobility restrictions to contain contagions by Covid-19, a lower demand for oil was led, so its price began to fall and even reached negative numbers.

Starting this year, the price has started to stabilize. At the end of October, the Mexican mix was trading at 77.6 dollars per barrel.

Leave a Comment