July 7, 2018 / 4:07 AM / in 10 days

Mexico's new government to cut VAT in region bordering United States: aide

MEXICO CITY (Reuters) - Mexico’s next government will press ahead with president-elect Andres Manuel Lopez Obrador’s plan to cut the value added tax (VAT) rate in a strip along the U.S. border, probably to 8 percent from 16 percent now, a top aide said on Friday.

Economist Carlos Urzua, picked for finance minister of Mexico's new president Andres Manuel Lopez Obrador, speaks during an interview with Reuters in Mexico City, Mexico July 2, 2018. REUTERS/Ginnette Riquelme

Lopez Obrador, who takes office on Dec. 1, hopes such measures could improve ties with the United States by reining in illegal migration, which has been a major bone of contention between Mexico and U.S. President Donald Trump.

The strip would be about 30 km (19 miles) wide so as to include major border cities such as Tijuana, Mexicali, Ciudad Juarez and Reynosa, said Carlos Urzua, the finance minister-designate.

“We’re going to have VAT of probably eight percent in this free zone, and only there,” Urzua told a news conference.

The VAT cut was among a series of measures Lopez Obrador proposed during the election campaign, aiming to boost the economy of the border region in order to stem the flow of migration north.

Urzua said the 2019 budget, which he must negotiate with the outgoing administration of President Enrique Pena Nieto, would be presented to Congress on Sept. 15.

He also confirmed that the incoming government was working on some of the plans he had floated during the campaign to improve Mexico’s finances.

These include centralizing government purchases in the ministry to root out waste and corruption, and consolidating welfare programs to find cash for more effective social security schemes.

Gerardo Esquivel, an economic adviser to the campaign, would be deputy finance minister, Urzua added.

Reporting by Dave Graham; Editing by Clarence Fernandez

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