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Mexico to slash tax rate on returns from IPOs

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Mexico to slash tax rate on returns from IPOs

Mexico's government plans to lower the tax rate on returns from initial public offerings to 10% from 30% in a bid to encourage more public listings, Reuters reported, citing Finance Minister Carlos Urzua.

"The idea is to try to promote initial public offerings," Urzua said at a Jan. 8 government-sponsored event in Mexico City.

The local stock market reacted positively to his comments, with Mexico's benchmark S&P/BMV IPC stock index rising 1.5% to an almost two-month high. Mexican stocks took a beating in the fourth quarter of 2018 after President Andres Manuel Lopez Obrador's party canceled a $13 billion airport project and proposed a bill to limit fees charged by banks.

Also at the event, Urzua announced a new platform for mobile-phone banking that he believes will boost financial inclusion in Mexico, where only 60% of adults have a bank account.

Additionally, the finance minister said the government will grant pension funds more flexibility on their investment decisions, although he did not provide specific details on that plan.

Gerardo Sienra, head of equity sales at Mexican brokerage Intercam, said "the market liked" the IPO tax cut announcement. However, he added that "there is a lot of caution, because we have seen that on any given day, the rules could change," Reuters reported.