The Challenge

A global consumer products company faced a new value-added tax regime that significantly favored products manufactured in Mexico over those imported from the U.S. Not only was the VAT system inconsistent with WTO and NAFTA commitments, but the government also sought to retroactively impose back-taxes on previously imported products.

The ASG Approach

Our immediate objective was to correct the unfair assessment of back taxes, while advocating for a fairer tax structure going forward. We set out to advocate for the elimination of the retroactive assessment and promote a level playing field for imported and domestic products, consistent with Mexico’s treaty obligations. We engaged with top economic advisors within the Mexican government who understood fair marketplace concerns, and suggested policy alternatives based on the approaches taken in similar markets and in our client's product category. Throughout, we continued to facilitate regular communication with influential decision-makers in the Mexican government, delivering persuasive messages regarding the importance of a fair marketplace to international investment.

The Result

The Mexican government dropped the assessment of back taxes. Aspects of the inequitable tax regime remained, but the company was able to adapt its business model to succeed within the VAT regime. Advocacy efforts helped lay the groundwork for more equitable treatment in the future.