Baja tax hike screwed Mexican border City businesses

Baja tax hike screwed businesses over

Economist says sales down 20% in TJ; inflation rate up 7%

Following a rancorous debate in Mexico City late last year, federal legislators voted to increase the sales tax from 11 percent to 16 percent, effective the first of the year. Baja California business leaders have since challenged the action in court, where a ruling is pending.

Speaking earlier this week at a breakfast meeting of the civic organization Grupo 21 in Tijuana, José Luis Contreras Valenzuela, president of the Baja California College of Economists, reported that between January 1 and March 31, business owners suffered a 20 percent fall in sales, while their counterparts across the border saw a 14 percent increase.

Contreras attributed the disparity to the sales-tax increase, which caused Baja Californians with a visa to head for stores in the U.S. to shop, while those without a visa shopped less in Baja because of across-the-board price increases.

A package of fiscal reforms that included the sales-tax hike “has generated negative results in the first three months of 2014,” Contreras was quoted as saying in an account of the Grupo 21 meeting published in the daily newspaper El Mexicano. “Border commerce has lost its competitiveness and the flight of consumers has increased.”

Adding to the economic hardship was a 7 percent increase in inflation, Contreras said, which further explains rising prices for products and services.

By the end of 2014, Contreras predicted, the average Baja California family will have spent $10,000 pesos (about $764) more than in 2013 to keep pace with inflation.