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Mexico’s Tax Administration Service (SAT) is out to squeeze taxpayers and increase its collections through a plan to conduct more audits of potentially delinquent contributors, according to a report published in Reforma newspaper on Thursday, May 6.

At the end of the first quarter, the SAT collected 112 billion pesos through audits or reviews of taxpayers, an annual increase of 33 percent over the comparable period in 2020, and the Treasury said that it expects to collect a record figure of outstanding taxes in 2021.

The Treasury Secretariat’s (Hacienda) strategy has been characterized by stricter applications and the denial of tax-for-tax compensations and other write-offs, the Reforma article said.

The SAT has also made the already-labyrinthic appeals process more difficult for taxpayers, which leads to many just paying additional taxes that they do not owe rather than trying to fight the system.

Other factors that explain a higher collection rate include the use of automated systems to detect irregularities, a shortage of in-person appointments and the use of video calls, according to the College of Public Accountants of Mexico (CCPM).

“When the offices were open, there was a certain willingness to listen to the taxpayers’ problems and make clarifications. The SAT would hear out the taxpayers’ point of view,” said Miguel Tavares Sánchez, spokesman for the CCPM’s Fiscal Technical Commission.

“Today, most taxpayers have no contact with the authorities, no route of appeals.”

If the SAT makes a request for information through a tax mailbox, the recipient has 15 days to respond before a formal audit is begun, which usually ends with an additional tax debt, he explained.

In the past, Tavares Sánchez said, taxpayers could approach the authority to inquire about the discrepancies detected and better prepare their response.

Now, taxpayers don’t have that option, so they usually comply with the demands of the SAT, even if they are not in agreement with the decision.

The alternative, Tavares Sánchez said, is an audit and possible additional penalties.

“In the spirit of avoiding sanctions, most taxpayers prefer to cover the alleged differences, instead of waiting for an audit,” he said.

Since last year, Tavares Sánchez said, the SAT has preferred to contact taxpayers by a video call, as an informal method of examination, to “invite” clarifying information on inconsistencies or to make supplemental tax payments.

This procedure is very inexpensive for the Treasury because it does not have to formalize the examination process or send auditors to the taxpayer’s home.

In the first quarter of 2021, this video inspection process led to an average additional collection of 126.5 pesos per taxpayer, compared to an average of 108.9 pesos per taxpayer in the first quarter of 2020 and more than double the average 53 pesos in 2010, Tavares Sánchez explained.

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