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Mexican government moving quickly to refund value-added tax

By: Stephen Downer

May 27, 2014

MEXICO CITY — Mexico’s maquiladora industry received a boost this week when the federal government announced it will refund the value-added tax (VAT) levied on temporarily imported machinery and materials used by the sector in its assembly operations within two months.

The sector had feared it could take many months, or even years, for the government to refund the 17 percent tax, introduced in January. But Finance Minister Luis Videgaray said May 21 that President Enrique Peña Nieto had instructed him to pay the refunds over 20 days, starting July 1.

According to government statistics, the 5,000 or so companies that operate within the maquiladora program imported supplies and machinery valued at $156.3 billion free of VAT in 2012 alone.

Index, the National Council of the Maquiladora & Export Manufacturing Industry that represents 20 maquiladora associations across Mexico, calculated that the sector would pay $25 billion in VAT a year.

And because of the expected long delay in getting the money back, many within the industry feared for the very existence of a number of companies.

Responding to the finance minister’s announcement, Index President Emilio Cadena Rubio said: “It’s time to build so that the export manufacturing sector [the maquiladora industry] is seen as a mirror in which Mexico is reflected as a first-world country.”

Earlier this year Cadena said that 40-50 percent of Index’s members work for the automotive industry “and many of them have injection molding operations.”

In excess of 2 million workers are employed by the maquiladoras.