Empresas ICA SA (ADR) (NYSE:ICA) not impressed with impending tax bill


Dallas, Texas 09/16/2013 (Financialstrend) – Enrique Pena Nieto, the Mexican President is proposing new taxes on capital gains, sugar drinks and the country’s highest-earners in a bid to transition America’s 2nd-largest economy from its dependence on revenues from oil.

The bill was sent to Congress on 8 September along with the President’s 2014 budget-proposal. This will place a 10% tax on the profits that  individuals gain from  stock-sales and dividends, raising the maximum personal income-tax rate to 32% from 30% It will avoid taxing medicine and food. The expectation is that these measures will help in offsetting a proposed lower-tax burden for Petroleos Mexicanos, the state-owned oil producer and help in pay for unemployment insurance and universal social security.

The Fiscal Consolidation fact

The reform would put an end to fiscal consolidation, a tax benefit. This permits holding-companies to postpone payment of taxes whenever their subsidiaries post financial losses. Companies that have the largest deferred tax-assets (the ones that will be most affected) are Empresas ICA SA (ADR) (NYSE:ICA), America Movil, Cemex SAB, Arca Continental  and Grupo Bimbo SAB.

Effects of the bill

Ratings companies might also be disappointed by this decision not to tax medicine and food. Another effect is that government bond-investors might be hurt as additional debt-issuance boosts the supply of securities, said Credit Suisse Group’s chief Mexico economist, Alonso Cervera. According to the bill, the tax bill will raise government revenue. The President has vowed to boost tax-collection as part of a number of economic overhauls to boost growth that is 40% slower than the regional-average over the last 5 years.

 Friday’s trading

In Friday’s trading, Empresas ICA SA (ADR) (NYSE:ICA) stock rose by 2.61%. The opening price of the shares was $8.46 which touched an intraday high of $8.72 and then dipped to close at $8.65. Approximately 0.509 million shares were traded on Friday while the average volume of shares traded over a period of 30 days was 0.615 million.