Income tax collection increased 28.8% annual to October; added 928,465 million pesos

The Tax Administration Service (SAT) reported that the collection of Income Tax (ISR) on the earnings of legal entities and individuals had an annual increase of 28.8% at the end of October, registering 928,465 million pesos.

The collection of ISR on the profits of legal entities accounted for 898.869 million pesos between January and October of this year, which meant an annual increase of 30 percent. While the collection from individuals registered 29,597 million pesos, an annual contraction of 1.1 percent

ISR collection from the earnings of all taxpayers represented 48.5% of the total 1.9 trillion pesos collected between January and October 2022. The remaining 51.5% of the amount corresponds to ISR withholdings, as well as other income, revealed the SAT .

Janneth Quiroz, deputy director of economic analysis at Monex, told El Economista that the collection of ISR from legal entities has been a consequence of the efforts of the SAT to reduce tax evasion and avoidance without the need for a tax reform; as well as the post-pandemic economic recovery.

For his part, James Salazar, director of economic analysis at CI Banco, commented that the collection of ISR has been a lifesaver since it has helped the contraction in tax revenues not be too noticeable.

Fight against circumvention

A part (of the annual increases) has to do with the improvements that the authority has made to combat and reduce tax evasion and avoidance. The pending payments of registered taxpayers this year have also helped,” Salazar explained.

In addition, added the analyst, the behavior of ISR collection has to do with the dynamism of economic activity and that in recent months it has been better than expected, although it is nothing extraordinary.

“The economic indicators were above expectations and in general terms they ended up favoring the collection of ISR. We are seeing it above all in the labor market, which has practically recovered the levels it had in the pre-pandemic,” Salazar explained.

The SAT detailed that the Income Tax is the one that presents the best behavior derived mainly from the increase in the income of the companies and the growth of formal employment.

For its part, the Mexican Institute of Social Security (IMSS) reported that formal employment in the country added 21 million 718,601 jobs in November; of these, 86.3% are permanent and 13.7% are temporary.

One year with two-digit increases

Thus, income tax collection in October was 160,057 million pesos, an annual increase of 12.5 percent. So far in 2022, tax collection has only had single-digit annual increases in May (5.1%) and June (9.8 percent) and the rest have been in double digits.

The Monex analyst explained that in December 2021 the monthly collection of Income Tax had an annual growth of 21.9% in real terms.

“December of last year was when we began to see these jumps in collection, possibly from December of this year the annual variation begins to slow down because there is a higher comparison base,” he said.

The specialist estimated that the monthly ISR collection in November would still show double-digit annual growth. However, from 2023 the slowdown in the annual variation will be more noticeable.

“The structural change (in ISR collection) was seen more since the end of last year and the effect has been maintained throughout this year (…) As long as more people continue to integrate into the (labor) formality and that companies are By increasing the ISR payment, we will continue to see these high growth rates,” Quiroz pointed out.

For James Salazar, ISR collection will continue to increase in double digits for the remainder of the year. However, in the next year the annual increases will hardly be two numbers because 2023 looks like a complicated scenario in economic matters.

Accumulated collection

Between January and October of this year, the collection via ISR was 1.9 trillion pesos, an annual increase of 14.3%, according to the Ministry of Finance and Public Credit.

Quiroz described the ISR collection as extraordinary, in addition to the fact that it has been very positive for the country and has made it possible to offset the drop in other tax revenues.

In the same period, the collection of the Special Tax on Production and Services (IEPS) had a contraction of 79.9% as a consequence of the tax incentives for gasoline.

The SAT reported that the tax incentives on the IEPS of gasoline, as well as the Value Added Tax and ISR, were 337,805 million pesos at the end of October.

In the referred period, tax revenues contracted 0.6% annually in real terms, accounting for 3.1 trillion pesos.

santiago.renteria@eleconomista.mx