Sales tax going up today in Mexico

Border businesses: U.S. likely to benefit

CHULA VISTA, Calif. — Mexican license plates are common in parking lots of shopping malls in U.S. border cities. They will be even more familiar after Mexico raises its federal sales tax in border regions to match the rest of the country, merchants and shoppers say.

The increase to 16 percent from 11 percent, which takes effect today, has caused large protests on the Mexican side of the border. Thousands have signed petitions to challenge the tax hike in court.

The Mexican government says the two-tiered tax structure, which was introduced decades ago to make border cities competitive, is no longer justified. Others say the in-

crease may drive more shoppers north of the border to U.S. stores, harming the economy and raising less tax revenue than anticipated.

“We don’t compete against the rest of Mexico, we compete against the American economy,” said Juan Manuel Hernandez, president of the Tijuana Business Coordinating Council, an umbrella group of business chambers.

U.S. border regions such as California’s Imperial Valley — which has three Walmart Supercenters and only 175,000 residents — have long depended on Mexican shoppers who buy everything from gasoline to groceries.

Mexican shoppers spend more than $4.5 billion a year in Texas border cities, according to the Federal Reserve Bank of Dallas.

Thomas Fullerton, an economics professor at University of Texas at El Paso, estimates the tax hike will cause Mexican shoppers to spend 5 to 10 percent more on the U.S. side of the border in 2014. U.S. businesses will benefit less in later years as Mexicans adjust to higher taxes, Fullerton said.

The tax increase, which the government of Mexican President Enrique Peña Nieto estimates will raise $1.15 billion a year, is part of a package of fiscal measures.

Peña Nieto’s administration says border businesses haven’t shared savings from lower sales taxes with consumers. It found that consumer goods were 4 percent higher than in the rest of the country and noted that other countries and states within the U.S. don’t allow lower sales taxes for business on their borders.

Hernandez and business leaders from other border states challenged those findings at a meeting with Treasury Secretary Luis Videgaray in Mexico City in October, showing results of their own survey involving a basket of consumer goods. It found that prices in San Diego were 4 percent lower than Tijuana and 37 percent lower than Mexico City. They offered studies predicting dire economic consequences.

About half of the country is sticking with the federal minimum wage of $7.25 an hour, which means low-income workers in these states haven’t seen an increase since 2009. The most populous of these states is Texas. Other larger states still at $7.25 an hour include Pennsylvania, North Carolina and Georgia.

Some states follow the federal standard because they don’t have their own minimum-wage laws.

Plenty of exceptions

Global minimum wages are literally all over the place. Many poorer nations don’t have them, while some countries have rates above levels in the U.S.

Foreign minimum wages also are hard to calculate. Some countries have dozens of different rates for workers, depending on the industry, region, age of the employee or other factors. Plus, currencies are always fluctuating.

But in a study of hourly minimum wages in some of its member countries by the Organisation for Economic CoOperation and Development in 2012, Australia finished first at $16 an hour, followed by Luxembourg ($13.40), France ($11.70), Belgium ($11) and Ireland ($10.90).

At the time of the study, here were minimum wages in selected other OECD nations: » Canada, $9.80 an hour. » United Kingdom, $9.40 an hour. » Japan, $9.20 an hour. » Spain, $4.60 an hour. » South Korea, $4 an hour. » Turkey, $2.70 an hour. » Poland, $2.60 an hour. » Mexico, 60 cents an hour.