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Calderón Announces Gradual Phase-Out of Vehicle Ownership Tax
 Suzanne Stephens Waller - Presidencia de la República
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June 25, 2010
 |  | Through these actions Federal Government will support the automobile industry and persons with lower incomes as well as boosting the recovery of the Mexican economy.
- President Calderón |  | | |
Mexico City - President Felipe Calderón signed a decree for the gradual phase-out of the ownership tax for new cars for a value of up to $250,000 pesos.
“This measure will come into effect as of the publication of the decree I have just signed until December 31 2011, when the Federal Tax on Car Ownership will be abolished,” he explained.
Accompanied by Secretaries of Finance and Public Credit, Ernesto Cordero Arroyo and Economy, Gerardo Ruiz Mateos, the President explained that persons buying a new vehicle at agencies will have their ownership tax paid by car distributors.
He explained that this measure will not affect the states, since in any case, they will receive the full amount of the corresponding tax.
"I hereby repeat my conviction and full respect of the legal mandate whereby the Federal Car Ownership Tax will be eliminated by the end of 2011.
It should be noted that Federal Government currently does not receive a single peso for payment of the ownership tax, since all the money collected is sent to the state treasuries,” he added.
Another measure included in the decree is that, in the case of companies, firms purchasing automobiles will be able to deduct tax payment on the ownership of vehicles with a value of $250,000 or less through tax incentives.
Lastly, a Guarantee Program will be implemented to make more credits available to Mexicans.
Through these actions, declared President Calderón, Federal Government will support the automobile industry and persons with lower incomes as well as boosting the recovery of the Mexican economy.
“By eliminating payment on the acquisition of new vehicles, we are supporting national industry, creating jobs in the production and distribution of vehicles throughout the country and also, and above all, contributing to Mexican families' income.
By eliminating payment of the ownership tax for new cars, we are also taking a step towards eliminating the ownership tax as a Federal Tax, which we pledged to do by the end of 2011,” he explained.
Press Statement by President Calderón
Presidencia de la República
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June 25, 2010
I am delighted to welcome you here to Los Pinos, the home of all Mexicans, to announce a stimulus package to help Mexican families wishing to buy a car and above all, to trigger the recovery of the national automobile industry, one of the most important sectors in our economy.
In Mexico, the automobile industry, including assembly plants, auto part firms, other related firms and providers together account for approximately 20% of the Manufacturing Gross Domestic Product. It produces nearly 11% of the jobs in this industrial sector in addition to being one of the main receivers of direct foreign investment in Mexico.
Between 2003 and 2008 alone, it captured over $10 billion USD and multi-billion dollar investments in the automobile industry continue flowing into Mexico.
Many Mexican families have at least one member employed in this important engine of our economy, whether in automobile production or distribution.
Due to its close links with the external sector of our economy and its sensitivity to consumer income, it has been one of the areas most severely affected by last year's international economic crisis.
That is why, throughout 2009, Federal Government supported this industry through the Technical Strike Program and other financing actions through the Development Bank involving over $27 billion pesos. Nevertheless, automobile sales in the country decreased by over 26% in 2009 as a result of the crisis.
In order to reverse this situation, it is essential to support this sector with measures designed to promote the purchase of new automobiles in the country, since this will strengthen the industry and create more and better jobs for Mexicans.
That is why Federal Government has decided to implement three very important concrete measures.
The first concerns the gradual phase-out of the vehicle ownership tax, beginning with the ownership tax on the acquisition of new vehicles. Specifically, we are going to support those that buy new cars by having Federal Government pay their ownership tax.
To this end, I have just signed a decree whereby Federal Government will have to cover the payment of ownership tax for new cars, for a value of up to $250,000 pesos, purchased by individuals.
This measure is designed to encourage the recovery of the sale of new cars in Mexico.
How does the mechanism work? When a person buys a new car, with a value of up to $250,000 pesos at an agency, the distributors will pay the car purchaser’s ownership tax. Those that purchase cars for this amount or less will not have to pay ownership tax.
Subsequently, in their monthly and annual tax declarations, sellers will be able to accredit the payment in their Income Tax declarations, meaning that the measure will not affect them in any way.
I would like to make it quite clear that the states will not be affected either, since in any case, they will receive the full amount of the corresponding tax and the incentive will be provided regarded of whether their contribution is local or federal.
Thus the states will not observe any changes in the amount or the way they currently collect car ownership tax.
This measure will come into effect as of the publication of the decree I have just signed until December 31 2011, when the Federal Tax on Car Ownership will be abolished.
It is important to note that since 2007, as part of the Finance Reform for Those with Least, the government I lead proposed the repeal of the Federal Ownership Tax. As a result of the legislative debate and a respectful dialogue with the state governors, it was agreed that the date for the definitive elimination of this tax would be December 31, 2011, as in fact will happen.
It was also agreed that before this date, the state will be able to establish local taxes on vehicle ownership or use, in which case, collection of the corresponding Federal tax will be suspended.
I hereby repeat my conviction and full respect of the legal mandate whereby the Federal Car Ownership Tax will be eliminated by the end of 2011.
It should be noted that Federal Government currently does not receive a single peso for payment of the ownership tax, since all the money collected is sent to the state treasuries.
That is why, despite our conviction of the need to abolish the ownership tax, since these are resources that are collected and spent in the states, we have respected the states’ freedom to opt for gradual schemes. Within these schemes, some states have already legislated their own car ownership taxes.
Second. In the case of companies, firms purchasing automobiles will be able to deduct the payment of taxes on the ownership of vehicles with a value of $250,000 or less through tax incentives determined by the Finance Secretariat, which will have an equivalent effect to this measure.
Third. We will implement a Guarantee Program to make more credits available to Mexicans and thereby help more Mexican families purchase a new car.
It should be noted that the proportion of new vehicles acquired through financing is less than 50%, which is lower than that recorded in previous registers. In other words, there has been a reduction of financing in the acquisition of new vehicles. This obviously affects consumers with lower incomes more.
How will this scheme operate?
Federal Government will establish guarantees that will be auctioned through National Financiera and directly awarded to the financing departments of car makers and banks.
In order for this to have a real impact on the sale of vehicles, the condition will be that any of these organizations, whether financial or banks, should have increased the amount of credit granted by at least 5% over last year.
Through this measure, we aim to trigger new credits for a sum of $2.5 billion pesos, which are expected to be used over the next six months.
As a result of the new scheme, the number of credits for the purchase of automobiles during the second half of the year could be over 12% higher than the amount granted for the same period last year.
By supporting the automobile industry and consumers with lower incomes, we will boost the recovery of our economy.
Ladies and gentlemen
Through these concrete measures, Federal Government is supporting the national industry and all those wishing to purchase a new car in Mexico.
By eliminating the vehicle ownership tax for the acquisition of new vehicles, we are supporting national industry, creating jobs in the production and distribution of vehicles throughout the country and also, and above all, contributing to Mexican families’ income.
By eliminating payment of ownership tax for new cars, we are also taking a step towards eliminating the ownership tax as a Federal Tax, which we pledged to do at the end of 2011.
By sparing consumers payment of this ownership tax, we are supporting Mexican families’ economy. By sparing consumers payment of car ownership tax, we are reinforcing a strategic sector of the national industry. By sparing consumers payment of car ownership tax we are promoting more economic activity and more and better jobs for Mexicans, by bringing Mexican families closer to their desire of having a new vehicle.
Through these actions, Federal Government confirms its commitment to continuing to promote the changes required by a future of well-being for Mexico and all Mexicans.
Thank you
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