Mexico homebuilders fret over tax increase proposals

Elemental Monterrey was commissioned by the government of Nuevo León, in northwest Mexico, to design 70 homes in the city of Santa Catarina.
Elemental Monterrey was commissioned by the government of Nuevo León, in northwest Mexico, to design 70 homes in the city of Santa Catarina.

By Kris Hudson and Amy Guthrie | The Wall Street Journal

Mexico’s new-home industry, still suffering from the global economic downturn and from shifting consumer preferences, is bracing for yet another blow from a package of steep tax increases proposed by President Enrique Peña Nieto.

Mr. Peña Nieto, who took office in 2012, announced a range of proposed tax increases in September as part of his long-awaited proposal to revamp the economy. His strategy for long-term growth is to raise new revenue to fund new social programs and reduce Mexico’s dependence on oil revenue.

But home builders are worried sales would be hurt by the measures, particularly Mr. Peña Nieto’s proposed new 16% “value added” tax that would apply to many home sales, mortgage interest and rents, among other consumer spending. He also wants to place a capital-gains tax on home sales of 1.24 million pesos ($94,200) or more. The previous floor was 7 million pesos.

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