“It is a very important project for winning investment, creating jobs and taking advantage of the economic strength of the United States,” Lopez Obrador said on his visit to Monterrey in the northern state of Nuevo Leon, reports the Business Standard.
The executive order decreed lower rates for both value-added and income taxes covering over 40 municipalities bordering the United States. Reuters is also reporting that the minimum wage would rise starting on January 1 to almost double the national rate.
According to Reuters, the tax cuts are expected to cost the Mexican government billions of dollars in revenues. And while the tax cuts may cut government income in 2019, Lopez Obrador’s government will implement a budget that seeks to use the spending cuts to help fund new social welfare and infrastructure projects.
After signing the tax incentive decree, Lopez Obrador said the tax zone will cover a strip of land 25 kilometers (15 miles) wide along 3,180 kilometers (1,976 miles) of the US border.
Throughout this region, income taxes will be reduced from 30 to 20 percent, while the value-added tax will be reduced from 16 percent to 8 percent. The minimum wage will be doubled to 176 pesos ($8.80). Fuel prices will be the same as in the U.S.
“It’s going to be the biggest free zone in the world,” President Lopez Obrador said, adding that this project will inevitably reduce migration. “Migration should be a choice, not forced,” he said.
President Lopez Obrador’s way of dealing with the migration problem affecting both Mexico and the U.S. is being seen as a positive solution compared to what U.S. President Donald Trump earlier this year described as an “invasion” consisting of gang members and terrorists.
While Trump continues to tweet about closing the U.S. border unless he gets his $5 billion for a border wall, Lopez Obrador is already looking ahead to developing areas from south to north – launching projects in a number of states that will create over 400,000 new jobs.
