Mexico Rejects Telephone Tax

Mexico’s Senate defeated a proposal to levy a 10% tax on local and national long-distance telephone calls, arguing the surcharge would make it harder for poor and middle-class Mexicans to afford phone service.

The 57-54 vote on specific articles of a law previously passed to tax some phone services, soft drinks, liquor and cigarettes deprives the government of about $817 million in extra revenue this year. The 10% tax still applies to contract cellular telephone service and to cellular calls made on certain pre-paid cards. “To tax telecommunications would scare away national and foreign investment, and would impede a growing number of Mexicans from access to telephone services,” said Sen. Eric Rubio Barthell, from the Institutional Revolutionary Party.

The Senate’s decision to reject the tax on phone services may help boost shares of Telefonos de Mexico, the country’s largest phone company, when markets open after the New Year’s holiday.