MEXICO OFFERS INCENTIVES FOR RETURNING CAPITAL

MEXICO OFFERS INCENTIVES FOR RETURNING CAPITAL

The Mexican government is offering steep tax savings for capital returning to the country in the next six months, the finance ministry announced last week.

Capital that was invested outside of Mexico before Sept. 30 and is returned to Mexico before March 31, 1996, will see huge tax benefits, said Alejandro Valenzuela, director of international affairs for the finance ministry."If they repatriate that capital in the next six months they will pay a tax of just 0.5 percent," said Mr. Valenzuela, who is also the chief spokesman for Mexico's economic recovery efforts.

After March 31, all returning capital will pay a 1 percent tax. The initiative applies both to Mexican investors and foreign investors who fled in droves in the run-up and after the ill-fated Dec. 20 peso devaluation and subsequent currency collapse.

"With this the aspiration is to continue stimulating the repatriation of capital, as a means to contribute to the growth of productive investment in the country and fortifying the national currency," said a finance ministry statement last week.

A previous decree set a 1 percent tax for all capital that had left the country before May 18, 1990. Mr. Valenzuela said the new decree treats all returning capital equally with a 1 percent tax after March 31, 1996.

Up until Wednesday's decree, all returning capital that had left after May 1990 had to be accumulated in a general tax plan that could be hit with taxes as high as 35 percent, or use a formula that involved a 25 percent tax rate.