Mexican tax break hits border stores

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The Mexican government has exempted a new tax on certain luxury goods when they are sold in border areas or the northwestern state of Baja California. The move will hit duty-free operators' price differentials on the border. The finance ministry published the changes to the new luxury tax law this week.

The luxury goods tax adds an additional 5% to the 15% value-added tax on selected items ranging from caviar and smoked salmon to televisions with screens bigger than 25 inches and other electrical goods.

But the new decree will remove the tax imposed for shops within 20km of the US border and the whole of Baja California, home to the resort town of Cabo San Lucas.

The move will disappoint local operators Duty Free Americas and Fairn & Swanson's Baja Duty Free, which stood to gain from the new tax.

• Baja Duty Free will open its fourth store in May, its largest yet at 10,000sq ft (930sq m) located in the upmarket Las Americas shopping mall in San Ysidro, California. For full details see the March issue of Travel Retailer International at the IAADFS show.