On October 18th, the lower house of Mexico’s Congress approved President Enrique Peña Nieto’s proposal to sweep away a range of deductions and allowances that the maquiladoras enjoy. In general, Mexico collects less tax than other middle-income countries, and the government is striving to raise more revenues to improve its lamentable public services. But the maquiladoras already face stiff competition from other countries offering juicy tax breaks to manufacturers: KPMG, an accounting firm, last year rated Mexico worse than five of its main rivals in terms of tax competitiveness. Accountants at another firm, Deloitte, reckon the reforms, if passed by the upper house in the coming days, will raise the maquiladoras’ effective income-tax rate from 17.5 percent to at least 30 percent.
Keywords: emerging nations, low-cost manufacturing, nearshoring, Mexican manufacturing, supply chain management, international trade