| | |  News Around the Republic of Mexico 
Mexico Eliminates Car Ownership Tax
 Loriana Marietta - Inside Line
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June 29, 2010
 |  | Inside Line says: Considering Mexico's relative weakness in collecting taxes, a more progressive approach could have been transforming the tax to a "green tax" that would have exempted hybrids and zero-emissions vehicles, and only taxed bigger and less efficient models, to incentivize cleaner technologies. |  | | |
Mexico City The Mexican government has eliminated a tax on new vehicles. The market here is still about 30 percent below 2008 figures and it dipped even lower last year so the government measure is hoped to help Mexican consumers get new vehicles and reduce the cost of acquiring cars in the country by about 3 percent.
Vehicles priced below about $19,000 will be the first to be exempted from the tax. Companies will be able to credit the tax on their annual tax filling, and in December 31, 2011, the tax will disappear completely.
Observers did not expect a complete rollback, given that Mexican states have relied heavily on it to fund their spending. Mexican President Felipe Calderσn made a campaign promise that he would rescind the tax and had previously stated he would eliminate it in December 2012, once his term is over. The new announcement moved that back a year and its timing created controversy since it is 10 days before key elections for some 14 state governors.
Dealership groups representing General Motors, Ford, Chrysler, Renault-Nissan, Volkswagen, Toyota, Honda and other companies lobbied for months to get fiscal stimulus to revitalize sales of new vehicles. They take the view that the current slim sales are the result of illegal imports of used U.S. cars into Mexico.
In the new plan, the government instructs the national development bank, Nacional Financiera, to facilitate cheap credits to finance loans for new cars. The industry so far appears pleased with the measure and expects it to help the auto market recover to its million-plus sales levels prior to the 2008-'09 economic crisis. This year, sales will struggle to hit 900,000 in Mexico.
The Car Ownership Tax was created ahead of the 1968 Olympic Games in Mexico to help the country build the necessary infrastructure for the event and has clung on for five decades. Observers believe the elimination of the tax should help Detroit sell more new vehicles south of the border..
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