Will Mexico Tax Increase Mean South Bay Business Boom?

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    NEWSLETTERS

    A sales tax hike taking effect Wednesday in Mexico is expected to have a big impact on border businesses in San Ysidro and Chula Vista, As NBC 7’s Wendy Fry explains, sales tax in Tijuana will jump from 11 percent to 16 percent.

    A sales tax hike taking effect Jan. 1 in Mexico is expected to have a tremendous impact on border businesses in San Ysidro and Chula Vista.

    The new federal sales tax will increase in Tijuana from the current 11 percent to 16 percent. Many economists are predicting it will push even more shoppers across the border into the U.S. to buy things like groceries, clothes and gas.

    "We do expect a high impact on our center," said Vanessa Barron, a spokeswoman for the Las Americas Premium Outlet in San Ysidro.

    The Mexican government is increasing the sales tax in border states to match the sales tax across the rest of the country. Carina Ramos, who buys consumer products in both Tijuana and San Ysidro, says the tax hike will definitely impact where she buys groceries like milk.

    "It will impact it," Ramos said, "because, as it is, stuff is more expensive out there (in Tijuana.) So people come out here to the U.S. to buy." 

    Previously, Mexico had a two-tiered tax structure with lower taxes in border states. It was meant to help make border communities compete with prices in the United States.

    Mexican President Enrique Pena Nieto has said savings from lower sales taxes have not been passed onto the consumer. His administration estimates the tax hike will raise more than $1 billion a year.
       
    But many think it will just damage an already struggling economy.

    "We need to remember that we’re one region," said Cindy Gompper-Graves the CEO of the South County Economic Development Council. "So, when the sales tax increases in Tijuana, it can have negative ramifications for companies on the U.S. side that are purchasing goods, services and supplies on the south side of the border." 

    Mexican Congressman Jaime Bonilla, who represents eight border states, said he was adamantly opposed to the tax hike, passed by Congress in October.

    He added it was bad timing for the tax increase as the border economies are beginning to recover after chaos and terror caused by drug wars.

    "I was against it because I know it will hurt businesses along the border," Bonilla said. "People aren't going to pay the 16 percent. They're just going to buy their items elsewhere."

    Baguelli Lopez, a binational consumer, agreed.

    "I have the ability to cross (the border), but many people don't cross into the United States," she said in Spanish. "They'll have to pay what they're being charged, which is the 16 percent more starting tomorrow first of January. So, it does hurt us quite a bit." 

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