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Mexico – New tax in Nuevo León could lead to job losses and bankruptcies

By Phil - 23 November 2016

The President of the Mexican Gaming Association (AIEJA) Miguel Angel Ochoa has said that a tax increase on gaming currently under consideration in the Congress in the State Nuevo León would have a negative impact on the industry and could put jobs at risk.

The new tax is part of next years’ tax reform bill and were put forward to the state congress by the state government earlier this week. The new bill would impose a 10 per cent tax on gaming establishments and would create a special security fund for the municipal governments where the casinos are located.

If passed the initiative would reform the Treasury and Finance Laws of the state. However in order to impose the new gaming tax articles 23 and 132 of the State Constitution would have to be amended first in order to regulate the operation of gaming.

Last week Mr Angel Ochoa presented an alternative proposal to lawmakers which would modify articles of the Treasury and Finance Laws of the state, and would impose a six per cent tax on revenues of which 33 per cent would be destined to the local municipal governments.

According to Mr Ochoa Sanchez, if the proposal to tax 10 per cent of casino revenues is approved, then as many as 5,000 direct jobs and 15,000 indirect jobs could be lost.

“The reality is that a casino not only pays taxes at a state and municipal level but it also pays the federal government 30 per cent via a special tax known as YET,” Mr Angel Ochoa explained. “In addition, two per cent of profits are paid to the Ministry of the Interior (SEGOB), which is in charge of monitoring the operation of casinos and they also pay the other taxes that any other businesses have,” he said.

He also stressed that the ten per cent tax could make many businesses unprofitable.

“With this 2017 would be a very difficult year and the owners would even have to evaluate the profitability of their gaming rooms, so I think they (the government) has better mechanisms to obtain more revenue, but not by bleeding away the attraction that has a casino has for an investor,” he said.
However Mr Angel Ochoa said that local lawmakers had shown a willingness to hear their concerns and remained optimistic. “Casinos are not refusing to pay, but we want you to understand that the economy is very complicated and that in our case there has not been an increase in the number of visitors to the rooms, so it is important that the government listen to us and find alternatives for dialogue and a solution before the tax is approved,” he said.