CHULA VISTA, Calif. (AP) — Mexican license plates arecommon in parking lots of shopping malls in
U.S. border cities. Theywill be even more familiar after Mexico raises its federal sales tax inborder
regions to match the rest of the country, say merchants andshoppers.The increase to 16 percent from 11
percent, which takeseffect Wednesday, has sparked large protests on the Mexican side of theborder. Facebook
pages with secessionist tones have generated about200,000 "likes." Thousands have signed petitions
to challenge the taxhike in court.The Mexican government says the two-tiered taxstructure, which was
introduced decades ago to make border citiescompetitive, is no longer justified. Others say the increase
maybackfire by driving more shoppers north of the border, harming theeconomy and raising less tax revenue
than anticipated."We don’tcompete against the rest of Mexico, we compete against the
Americaneconomy," said Juan Manuel Hernandez, president of the Tijuana BusinessCoordinating Council, an
umbrella group of business chambers.U.S.border regions like California’s Imperial Valley — which has
threeWal-Mart Supercenters and only 175,000 residents — have long depended onMexican shoppers who buy
everything from gasoline to groceries.Brand-name clothing and electronics are perennial draws for
Mexicansseeking products that are more expensive or hard to find south of theborder.Mexican shoppers spend
more than $4.5 billion a year inTexas border cities, according to the Federal Reserve Bank of Dallas.Fed
economists estimated in March that Mexican border crossers accountfor 58 percent of retail sales in Laredo
and 42 percent in McAllen.Publishedresearch is more dated for other border states, but the impact
isundeniable. University of Arizona researchers concluded that Mexicanshoppers accounted for 48.6 percent of
taxable sales in Santa CruzCounty, Ariz., which includes Nogales, from July 2007 through June
2008.ThomasFullerton, an economics professor at University of Texas at El Paso,estimates the tax hike will
cause Mexican shoppers to spend between 5percent and 10 percent more on the U.S. side of the border in
2014.Smaller cities like Douglas, Ariz., and Calexico, Calif., are expectedto feel it more than San Diego
and El Paso, which have more diverseeconomies.U.S. businesses will benefit less in later years asMexicans
adjust to higher taxes, said Fullerton, who has studied howchanges in the Mexican economy affect retail
sales in El Paso.Thetax increase, which the government of Mexican President Enrique PenaNieto estimates will
raise $1.15 billion a year, is part of a package offiscal measures that also raises taxes on businesses and
top-end wageearners, ends some deductions and introduces a tax on junk food.PenaNieto’s administration says
border businesses haven’t shared savingsfrom lower sales taxes with consumers. It found consumer goods were
4percent higher than in the rest of the country and noted that othercountries and states within the U.S.
don’t allow lower sales taxes forbusiness on their borders.Hernandez and business leaders fromother border
states challenged those findings at a meeting with TreasurySecretary Luis Videgaray in Mexico City in
October, showing results oftheir own survey of a basket of consumer goods that found prices in SanDiego were
4 percent lower than Tijuana and 37 percent lower than MexicoCity. They offered studies predicting dire
economic consequences.Thesecretary didn’t argue with the studies, according to Hernandez, butasked what
would happen if businesses absorbed the impact or shared thehit with consumers. The discussions went
nowhere.The tax increasespawned Facebook pages with renegade slogans for Mexican border
states."Republic of Baja California" has 140,000 likes, and "Republic ofChihuahua" has
36,000 likes.About 2,500 shoppers signed apetition the weekend before Christmas at a Tijuana shopping mall
to seekan injunction against the tax increase, Hernandez said. The Tijuanabusiness group is leading an
effort in Mexican border states to submittens of thousands of signatures to a federal court in Tijuana in
earlyFebruary."It’s necessary to speak up because the border needs tobe able to compete," said
Esteban Elias, 44, a Tijuana auto mechanic whosigned the petition and buys groceries and clothing in the San
Diegosuburb of Chula Vista.Until recently, Elias, like millions livingin Mexican border regions, went to the
U.S. on a "border crossingcard," which allows quick visits within short distances of the
border.Since his card expired, he places orders through others. Other Mexicanshoppers are U.S. citizens or
legal residents.Some speculate thatMexican customs officials will step up inspections on returningshoppers,
discouraging cross-border jaunts. Purchases are duty-free upto $300 a person during the winter holiday
season, but many shoppersflout the rules.Still, U.S. business leaders are geared for a sales
bump."Thistax increase gives Mexican nationals an excuse to shop and spend moneyon the U.S. side,"
said Steve Ahlenius, president of the McAllen Chamberof Commerce.___Associated Press writers
ChristopherSherman in McAllen, Texas, Juan Carlos Llorca in El Paso, Texas, and E.Eduardo Castillo in Mexico
City contributed to this report.Copyright 2013 The Associated Press. All rightsreserved. This material may
not be published, broadcast, rewritten orredistributed.