The federal government will remove the IVA value-added tax from gasoline and diesel in the northern border region, the economy secretary said yesterday.

The measure will take effect January 1 as part of the introduction of a northern border free zone, where the IVA will be reduced across the board from 16% to 8% and the maximum income tax rate (ISR) will drop to 20%.

Graciela Márquez Colín told a press conference that taking the tax off fuel would “reduce the gap” between gasoline and diesel prices on the Mexican side of the border and those on the United States side.

“. . . What we’re trying to do is close that gap to stimulate companies and provide them with lower energy costs,” she said.

“These measures, [lower] energy prices and tax incentives are accompanied by a twofold increase in the minimum wage . . . The minimum wage on the northern border is going to be 176 pesos [US $8.80] . . .” Márquez added.

A liter of regular gasoline in the northern border region currently costs on average 20.03 pesos (US $1), the newspaper El Sol de Tijuana reported. Without IVA, the same liter of fuel would cost 16.83 pesos (US $0.84).

“. . . The important thing here is the relief on consumers’ hip pockets,” said Alejandro Borja Robles, president of the Tijuana Gas Station Owners’ Association.

“Money that is saved will be used in other businesses, which logically will be a benefit for all. You can see the will of the government to support the border region, something that we hadn’t seen in more than 18 years,” he added.

Borja also said the removal of the IVA from fuel would encourage people who usually fill up their cars in the United States to do so at home.

The president of the Baja California College of Economists praised the government’s decision to eliminate the IVA on gasoline and diesel as well as the implementation of the free zone.

“Everything that can be done to stimulate companies and make them more competitive looks good to me,” Domingo Ramos Medina said.

He added that investment in the border region, consumption and employment would all increase.

The free zone and higher minimum wage area will apply to 43 municipalities in six states.

Source: El Economista (sp), El Financiero (sp), El Sol de Tijuana (sp)