One of the disadvantages of aging is that I have recurring Henny Penny moments on the same topic.
Yesterday "Eddie Willers" posted a piece on his blog concerning a new Mexican tax. Effective 1 July 2008, Mexico will impose a 2% tax on all cash deposited in a Mexican bank during a month in excess of 25,000 pesos. The tax is called Impuesto de Depositos en Efectivo (IDE). And, just like the United States, the bank will act as the tax collector and send it off to Hacienda.
I remember reading about this reform earlier this year -- and ran around as if I had been bonked on the head by an acorn. From a personal standpoint, I was worried that my buying power in Mexico was going to be reduced by another 2%. My plan had been to have my retirement checks electronically deposited in an American bank account and then I would electronically transfer whatever amount I needed to qualify for my FM3 visa to an affiliated Mexican bank.
It looked like a very clever plan. After all, quite a few expatriates do just that. It keeps a minimal amount available in a pesos account and the bank can then provide the necessary statements for the annual FM3 renewal.
Yesterday "Eddie Willers" posted a piece on his blog concerning a new Mexican tax. Effective 1 July 2008, Mexico will impose a 2% tax on all cash deposited in a Mexican bank during a month in excess of 25,000 pesos. The tax is called Impuesto de Depositos en Efectivo (IDE). And, just like the United States, the bank will act as the tax collector and send it off to Hacienda.
I remember reading about this reform earlier this year -- and ran around as if I had been bonked on the head by an acorn. From a personal standpoint, I was worried that my buying power in Mexico was going to be reduced by another 2%. My plan had been to have my retirement checks electronically deposited in an American bank account and then I would electronically transfer whatever amount I needed to qualify for my FM3 visa to an affiliated Mexican bank.
It looked like a very clever plan. After all, quite a few expatriates do just that. It keeps a minimal amount available in a pesos account and the bank can then provide the necessary statements for the annual FM3 renewal.
But the loss of 2% would be a big financial hit to take merely for the convenience of some paperwork.
Now -- go back up to the third sentence of this post. The reason I should not worry is right there: "2% tax on all cash deposited." The electronic transfers will not incur the tax. Only if I redeposit money as cash in excess of 25,000 pesos per month will the tax kick in.
I had read earlier that the Mexican government is attempting to find methods to increase its tax base. Economists love terms like that. To the rest of us, it means that the government is trying to smoke out the tax cheats -- and to take more for itself.
Anyone who lives in or visits Mexico knows that the place is a cash economy. Rent? Cash. Groceries? Cash. Gasoline? Cash. A check? Sure, as long as it clears before you accept delivery of your goods. Credit cards? As rare as an honest politician in Illinois. And, as in any economy where cash changes hands, very little gets reported to the tax man.
This is a rather blunt weapon that will affect small businesses more than large corporations. But the obvious attempt is to force Mexico into a more modern economic model. And that translates into a system where the government can better track the flow of money to ensure that Hacienda can touch it for one brief moment and make a portion its own.
My libertartian spirit mourns the loss of another bit of liberty. But, even we libertarians realize that government needs a minimal amount of money to provide services. I would like to believe that is where this money will go. But I may as well believe that I will not act like Henny Penny the next time I hear about this issue.
Now -- go back up to the third sentence of this post. The reason I should not worry is right there: "2% tax on all cash deposited." The electronic transfers will not incur the tax. Only if I redeposit money as cash in excess of 25,000 pesos per month will the tax kick in.
I had read earlier that the Mexican government is attempting to find methods to increase its tax base. Economists love terms like that. To the rest of us, it means that the government is trying to smoke out the tax cheats -- and to take more for itself.
Anyone who lives in or visits Mexico knows that the place is a cash economy. Rent? Cash. Groceries? Cash. Gasoline? Cash. A check? Sure, as long as it clears before you accept delivery of your goods. Credit cards? As rare as an honest politician in Illinois. And, as in any economy where cash changes hands, very little gets reported to the tax man.
This is a rather blunt weapon that will affect small businesses more than large corporations. But the obvious attempt is to force Mexico into a more modern economic model. And that translates into a system where the government can better track the flow of money to ensure that Hacienda can touch it for one brief moment and make a portion its own.
My libertartian spirit mourns the loss of another bit of liberty. But, even we libertarians realize that government needs a minimal amount of money to provide services. I would like to believe that is where this money will go. But I may as well believe that I will not act like Henny Penny the next time I hear about this issue.
