Why do tourist businesses in Mexico give a big discount when paying in cash?

10/19/2021 10:38:11 PM

Please note: when you pay for some service/goods a certain amount X, the profit (so the money that actually stay in the pocket of service/goods provider) is on the order of 8-10% at best. This X includes VAT that the shop must transfer to the Government. After taxes, let’s assume the net profit will be ~5%.

The credit card fees are calculated on X (even on VAT!), not on the profit. If credit cards ask fees on the order of 1-3%, it means that they are taking something between 20% to 50% of the net profit.

12/25/2019 8:13:58 PM

There are a bunch of legit reasons

  • Save Credit Card Service fees (2%-3%)
  • No risk of having to chase or eat a bad payment.
  • Less paperwork

However, I suspect the main reason is the same as in most other places in the world: To put it delicately: Cash allows for “more creative” accounting practices which may or may not be legal and may or may not result in substantially less tax payments.

Even in the US it’s not uncommon for a contractor to give you 10% on a full cash payment.

Credit:stackoverflow.com‘

About me

Hello,My name is Aparna Patel,I’m a Travel Blogger and Photographer who travel the world full-time with my hubby.I like to share my travel experience.

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