Concerns Rise Over Proposed Tax Hike on Digital Enterprises in Mexico
The Mexican government’s initiative to augment the tax obligations for companies operating within the digital realm has sparked unease among key industry stakeholders, notably Mercado Libre.
The firm anticipates that this legislation could exert a detrimental influence on e-commerce expansion, adversely affecting thousands of small and medium-sized enterprises (SMEs) relying on online platforms and potentially driving up product prices for consumers.
Furthermore, the digital marketplace cautioned that such measures could curtail its investment aspirations for the subsequent fiscal year.
The Proposal Under Scrutiny
This comprehensive governmental proposition, encapsulated within President Claudia Sheinbaum’s Economic Package 2026, is presently under deliberation in the Chamber of Deputies.
The initiative aims to mandate that marketplaces withhold taxes amounting to 10.5% on transactions conducted by corporate entities utilizing their facilities. This comprises a 2.5% levy for Income Tax (ISR) and an 8% charge for Value-Added Tax (IVA).
Potential Ramifications
While the mechanism is anticipated to significantly bolster public revenues expeditiously, it may jeopardize seller liquidity.
Alehira Orozco, Director of Government Relations at Mercado Libre, succinctly encapsulated the myriad implications: “We are poised to witness two critical phenomena: SMEs retreating from online sales in favor of physical channels lacking traceability, and an uptick in prices as a resultant reaction from our partner vendors.”
Mercado Libre’s Unique Position
As a dominant player sharing a substantial proportion of Mexico’s e-commerce market alongside Amazon, Mercado Libre stands as the solitary entity vocally contesting this fiscal plan. The firm posits that SMEs, integral to its operational framework, will endure the most substantial pressure owing to their restricted profit margins and limited ability to sustain liquidity without ongoing influxes of cash.
Despite retention measures resulting in tax credits that can be reclaimed later, the reimbursement process tends to be sluggish and bureaucratic; for instance, IVA surpluses are reclaimed monthly, while ISR surpluses are processed annually, consequently intensifying immediate liquidity concerns.
Counterproposals and Implications
- Mercado Libre has submitted an alternative proposal to financial and legislative authorities, advocating for a retention rate of 1% for ISR and 2% for IVA, acknowledging existing fiscal commitments.
- Despite these overtures, the company has noted that dialogue has proven unproductive.
Orozco articulated the interconnectedness between vendor performance and corporate viability: “If our sellers sell less, Mercado Libre sells less. And obviously, that has an impact even on the company’s investment plans.”
She recalled the firm’s announcement of a US$3.4 billion (MX$62 billion) investment strategy for its Mexican operations. “If this legislation proceeds, anticipated future investments will likely be curtailed,” she cautioned, underscoring the necessity of funding to bolster its logistics infrastructure and distribution capabilities.
Broader Repercussions for E-Commerce
A potential downturn for the e-commerce sector could undermine governmental objectives. The upcoming budget for the next fiscal year is predicated on the assumption of enhanced tax revenues without imposing additional direct taxes on consumers.
Nevertheless, the projected tax escalations are likely to be transferred to consumers in the form of elevated prices amid an inflationary backdrop. Moreover, a deceleration in economic activity could jeopardize foreign direct investment—crucial for fostering job creation and stimulating consumption.
According to the Mexican Association of Online Sales (AMVO), Mexico ranks as the second-largest e-commerce market in Latin America, with retail sales projected to reach MX$789.7 billion in 2024, reflecting a robust 20% annual growth.
Sectoral Disputes Reignited
The fiscal proposal has also rekindled contention within the sector, as platforms established legally within Mexico contend that competitors operating directly from abroad—such as Chinese entities Temu or Shein—are exempt from local tax obligations, permitting them to offer more competitive pricing.
Source link: Mexicobusiness.news.
