Countries’ tax policies are of course intertwined with their trade strategies at many points, as the current debate over U.S. tax reform illustrates. Consider, for instance, Speaker Paul Ryan’s recent claim that the U.S. tax code is “one of the worst” in the world and that it undermines the nation’s global competitiveness.
Trade’s impact on tax is not always so easy to detect, though it may run very deep. It may, for example, influence adoption of reporting requirements, as Vertex’s George L. Salis points out in a new Tax Notes International article, “Mexico’s CbC Reporting Requirements Are Part of a Larger Trade Strategy.” George is Vertex’s principal senior tax compliance analyst, a tax lawyer and a certified business economist (CBE). He notes that Mexico was remarkably quick to adopt the OECD’s recommended country-by-country reporting (CbCR) template (part of the OECD’s BEPS initiative), and in fact started the effort to amend its income tax law even before the BEPS action items were finalized.
Mexico’s embrace of CbC reporting sends a strong message to its trade partners about the country’s support for free trade and tax transparency, as George notes: “While the drawn-out uncertainty put forth by President Trump around the North American Free Trade Agreement’s potential renegotiation or abolishment poses difficulties for Mexico, the way the country adopted the OECD’s CbCR requirements demonstrates Mexico’s commitment to its sustained leadership position in Latin American trade and beyond.”
If your company does business in Mexico, you’ll want to give this article a close read. In addition to the trade/tax discussion, it offers an overview of the tax law changes; tips on how to assess your readiness for CbC reporting compliance; and suggestions on how to tackle the data management challenges CbCR will bring.
Please remember that the Tax Matters provides information for educational purposes, not specific tax or legal advice. Always consult a qualified tax or legal advisor before taking any action based on this information.