How Mexico’s electronic invoicing system favors the big

Mexico’s electronic invoicing system, managed by the Tax Administration Service (SAT), primarily aims to improve tax compliance and transparency in transactions. Through Digital Tax Receipts via the Internet (CFDIs), SAT can monitor operations in real-time, reducing tax evasion and ensuring better fiscal control.

The system seeks to automate processes, simplify audits, and consolidate financial information to detect irregularities more efficiently. It also promotes the formalization of the economy by encouraging businesses to operate within the legal framework, thus expanding the tax base and fostering transparency in commercial transactions.

Another key goal of the system is to modernize tax administration, aligning it with global best practices and encouraging the use of technology in business operations. Ultimately, SAT maximizes revenue collection, in theory ensuring resources to fund essential public services.

However, the electronic invoicing system poses several challenges for small and medium-sized enterprises (SMEs) and individual taxpayers. High compliance costs are a significant burden, as many must invest in specialized software or hire accountants to manage the system’s complexity. Frequent regulatory updates and specialized knowledge requirements further complicate compliance, especially for businesses without in-house expertise. 

The system also increases administrative burdens, with time-consuming invoice preparation and error correction processes. Technology barriers, such as limited digital literacy or poor internet access, disproportionately affect disadvantaged communities or smaller operations. Additionally, errors in invoicing or delays can disrupt cash flow, hinder access to credit, and expose taxpayers to fines or audits. 

In that sense the electronic invoicing system can be seen as favoring large corporations over SMEs and individual taxpayers due to disparities in resources and capabilities. Large companies benefit from economies of scale, as compliance costs like software and specialized staff are more manageable for them. They also have advanced infrastructure and in-house expertise, making it easier to adapt to the system’s demands. 

Although the system promotes transparency and compliance, its complexity disproportionately burdens smaller taxpayers, emphasizing the need for SAT to be more inclusive to create a more level playing field. As it is currently implemented the electronic invoicing system creates barriers for business development in rural and disadvantaged communities due to limited access to technology, financial constraints, and complex compliance requirements. High costs and administrative burdens deter informal businesses from formalizing and restrict opportunities for growth. Frequent rule updates and inequities favor larger companies, leaving smaller businesses at a disadvantage. These challenges limit economic mobility and worsen existing inequalities.