Some Mexican Taxes, Explained

 Some Mexican Taxes, Explained


Remember the 1966 TAXMAN song by The Beatles? Part of the lyrics were:

Let me tell you how it will be / There’s one for you, 19 for me / ‘Cause I’m the taxman / Yeah, I’m the taxman / If you drive a car, car (I’ll tax the street) / If you try to sit, sit (I’ll tax your seat) /If you get too cold, cold (I’ll tax the heat) /If you take a walk, walk (I’ll tax your feet). 

Now, I’m pretty sure you have it singing in your head LOL! 

Well, let’s get serious. Lately, when this precious rag posts something about taxes being used, or funding received from the federal government, some followers rant about the huge amount of money that Los Cabos generates and is used in unimportant things like the annual fiestas, bringing expensive artists for free musical shows, etc., instead of paving the streets, more water supply or building overpasses where needed. 

Speaking of overpasses along the tourist corridor between Cabo and San Jose, that road is federal (one of the reasons there are no stoplights) and the overpasses must be built by Fonatur, the federal agency that developed the Cabo San Lucas marina and the San Jose hotel zone. Fonatur must approve and pay for this, although it is being negotiated that the city government pitches some money on it, too. 

Well, back to taxes. I will try to explain where the tax money comes from and where it goes. 

Lodging Tax (Impuesto al Hospedaje)

It was established in 1995 and the revenue generated goes to tourist promotion. It is 3% of the hotel room rate, and it is charged to the guests and paid to the state government by the hotels or lodging establishments every month.

It is a state tax and the money goes 100 percent in the state coffers.

The tax for lodging via Airbnb or similar apps goes to the federal government. 

Value Added Tax (IVA)

It is the equivalent of the Sales Tax and was created in 1978 to generate additional revenue for the federal government. It is 16% of the sale price of any item, including lodging.

In the border states of Northern Mexico, the percentage is reduced to 8 percent. The intention of reducing it was to motivate the consumer to buy in Mexico and not in the U.S. Ha ha. 

The IVA is paid directly to the federal government each month, online. Then it is redistributed to the states to support those with less revenue. 

For instance, in 2022, Mexico City, Nuevo Leon and Veracruz generated 69.9 percent of the nation’s total but only received back 16.7 percent. 

This tax was created to support the federal government’s expenses in infrastructure, health, etc. 

When a taxpayer gets behind, then the state government takes over the responsibility of collecting it and when they do, they keep a percentage of the monies, including fines and interest. 

Payroll Tax (Impuesto sobre Nómina)

This is a state tax of 3 percent over gross salaries paid, including special bonuses like Aguinaldo (Christmas bonus). The money goes 100 percent to the state coffers. 

Cobro de Aprovechamiento a Turistas Extranjeros (Tourist Tax)

This tax was approved by the State Congress in 2022 and it amounts to 400 pesos (about $24.40 USD at today’s rate of exchange). It applies to every foreign tourist that stays in Southern Baja for more than 24 hours. It does not apply to cruise ship passengers. The monies go to the state coffers and are spent on education, culture, sports, health and infrastructure, supervised by the state tourism fund. 

City Taxes 

These are part of the regular, constant income of the municipal government. The percentage varies but it is charged as property taxes, housing developments and subdivisions, home and land sales, shows, concerts, theater plays, etc. that charge a fee for attending. Façade signs and carny games are taxed as well.

Other taxes are paid for business operating licenses, construction, urbanization, water supply and street food stands.

The money stays in the city coffers. 

Where does all this money go?

As in most other countries, it goes to health, education and infrastructure. Most municipalities in Mexico also use part of it to help the less privileged sometimes with money, laptops for students, wheelchairs, food staples, help for the elderly, etc. 

And here, our readers need to realize Los Cabos is not just the hotels, restaurants and bars. Our municipality reached a population of 750,000 last year, according to the National Institute of Statistics and Geography. The numbers below correspond to the 2020 census, and it is the list of the main communities of Los Cabos, that cover from Migriño on the road to Todos Santos to Buenavista in the East Cape. 

Inside these communities are many smaller rural areas and ranches. In Los Cabos, there are several neighborhoods created by people squatting in them. Several of them do not have regular water supply and the city provides it with water trucks. Several do not have electricity and the city joins the federal government in installing it. 

And that, folks, is where the money is spent. Yeah, I know, some will say, how about the money the government officials steal? That’s something we can’t prove, so we won’t get into it.