Capital Gains Tax Proposal Raises Grave Concerns In Mexico

by Mike Godfrey, Tax-News.com, Washington

15 November 2001

Mexico's congressional debate over whether or not to charge a 20 per cent capital gains tax on stock market transactions has sparked major concerns for officials from Mexico's stock exchange who have warned that the tax could devastate the country's development plans at a time when it is almost at a stage where it can attract vital investments.

'Today the market is attractive after three decades of crisis, poor administration, high inflation and lack of access,' said Jorge Garcia Fernandez, who is in charge of issuance at the exchange.

He told reporters that a capital gains tax in Mexico would force local equity investors to look to America instead. It would also discourage foreign investors from buying local shares; many Mexican firms already list American Depositary Receipts in New York - 'for us it's very simple to invest in the US, it's close and we're familiar with things there,' he said.

Currently there is no capital gains tax on stock transactions in Mexico, but the opposition Party of the Democratic Revolution (PRD) has been pushing for the tax for some while and has taken the opportunity of the debate over the fiscal reform package to once again raise the issue as a compromise tactic if it agrees to other reforms.

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