Welcome back to the podcast, Bribes, Swindle, or Steel.

I'm Alexandra Rogge, and today we're talking about the Mexican government's response

to the widespread use of fake invoices to support tax deductions.

The government has blacklisted entities caught doing this and now, with new regulations earlier this year, has ramped up the penalties.

Our guest is Omar Zuniga. He is a partner in the Mexico City Office of Krill Law Firm, where he specializes in tax law and advises multinational companies doing business in Mexico and Mexican companies doing business abroad.

Omar, thank you for joining me.

Thank you very much for the invitation. It's a pleasure to be here. This is a really interesting

topic. It's a little bit off our beaten path because it is specific to Mexico, but it's getting

a lot of attention. For listeners unfamiliar with the issue, why don't you provide some history on the initial law that we're discussing in the tax code, when it was implemented, and what conduct or misconduct it addresses?

This issue has been going on for a while in the minds of the Mexican tax administration.

It's rather unfortunate because, in essence, it's a nasty

practice of having service providers issue some sort of invoices with the tax requirements

according to the law. That's fine. I mean, everyone that is providing a good or a service should do

that. But the problem is that here, there is providing a good or a service should do that. But the problem is

that here, there is no underlying good or service. It's just a simulation that allows taxpayers

to pay a certain amount of money and erode their tax base, mostly for purposes of the calculation

of income taxes. in exchange for an

invoice that will satisfy every single tax requirement under the law, except for the fact that

there is no underlying good or service related to that invoice. Commonly, we refer to invoices as CFDIs, which is an acronym for the digital

type of invoices that are issued in Mexico. This is a simulated practice. It's obviously forbidden,

but unfortunately it had gained traction in Mexico, and there are a number of taxpayers that use this practice to diminish the amount of

taxes that they pay on a regular basis. This is not new. This has been going on for quite a while.

...