Digital Platform Tax Could Represent 6 Percent of Mexico’s GDP

The government hopes that up to MX$100 billion (US$4.4 billion) can be collected from digital platforms in taxes. "We are just starting to work on the issue of digital taxes but to have an order of magnitude, once we have a stable mechanism this should represent more than MX$100 billion (US$4.4 billion) in taxes like VAT and ISR,” said Minister of Finance Arturo Herrera.

According to Herrera, the digital economy represents around 5-6 percent of the national GDP, which is equivalent to around MX$1.3 trillion (US$57.3 billion), an amount that could increase due to COVID-19 lockdowns. From January to May 2020, withholding taxes from digital platforms amount to MX$123.7 million (US$5.4 million), of which MX$87.5 million (US$3.9 million) correspond to VAT and MX$36.2 million (US$1.6 million) to ISR. Herrera said during a press conference on loans for SMEs that digital platforms such as Uber, Netflix and Amazon must pay taxes for an equity issue, because "it cannot be that some of the richest companies in the world are not paying taxes.”

Likewise, he explained that as part of the modernization of the Mexican tax system following the rise of these platforms, modifications came into effect on June 1 of this year. Through this new scheme, the two main taxes charged to digital platform companies are VAT and ISR. The Ministry said this is not new since ride-hailing and food delivery platforms have been part of a pilot test of this scheme since 2019.

In early June, Manager of Digital Commerce and International Organizations of the Latin American Internet Association (ALAI) Sissi De La Peña, said that excessive regulation of tech companies could affect the digital economy by inhibiting innovation and new developments. "The digital economy tries to find alternative solutions to problems that we do not have at the moment and excessive regulation in all cases can inhibit this development of new services. All countries and companies have been in an extensive collaborative development with the OECD, which expects to have results by the end of 2020 with something much more specific on audit issues," said De La Peña at the 11th edition of the South School on Internet Governance event.