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VAT, income tax greatest evasions in Mexico

Mexico City, Mexico —  A recent study shows tax evasion in Mexico is equivalent to 2.6 percent of the GDP with VAT and income tax being the most common.

A study published by the University of the Americas of Puebla revealed that personal income tax evasion generates the largest amount of losses each year reaching 269 billion peso. Next in line is VAT or Value Added Tax with a fiscal loss of over 188 billion peso annually.

Other tax losses for Mexico include the Special Tax on Production and Services (IEPS) of 20 billion peso and taxes on foreign trade with a little over five billion.

Through the study Global Tax Evasion 2017, the university reported that between 2015 and 2016 tax evasion showed a decrease, going from 3.2 percent to 2.6 percent of the GDP.

The university reported the country managed to consolidate a downward trend over the past 12 years in which evasion decreased by 50 percent.

“Tax evasion is any partial or total action tending to evade or delay the fulfillment of a tax obligation or payment of taxes,” explained the Tax Administration Service (SAT).

The university study revealed that of the total evasion registered in Mexico, personal income tax evasion represents 58 percent of losses, while VAT tax evasions make up 37 percent.

When making a breakdown by type of taxpayer and tax, the analysis indicates that in terms of income tax, the most important tax evasion rates are focused on the leasing regimes of individuals and individuals with business activity.

While the sector of moral persons or companies in salaries and wages register tax evasion rates of 19.9 percent and 11.5 percent in each case.

The United States experiences the highest annual corporate tax losses of any country with an estimated $189 billion unaccounted for every year, representing 1.13 percent of GDP.

According to the Conference Board of Canada Report, the Canadian government says the country could be losing as much as 47.8 billion per year from tax gaps but also says they don’t keep track of annual tax losses.