MEXICO CITY, Nov 1: Mexico’s Congress passed a package of measures aimed at bolstering the country’s weak tax revenues, but only after watering down a plan that is expected to have a moderate impact at best.
The bill, which includes higher taxes on the rich as well as levies on junk food and stock market gains, is a central plank of an economic program spanning energy to telecoms that aims to ramp up growth in Latin America’s No 2 economy.
Facing a yesterday’s +deadline, the ruling Institutional Revolutionary Party (PRI) pushed the package through with the help of leftist lawmakers, making final tweaks in the Senate to pare back a planned income tax increase.
The lower house then gave final approval to the bill that President Enrique Pena Nieto is now expected to sign into law.
Mexico has the lowest tax revenue in the 34-nation Organisation for Economic Co-operation and Development (OECD), restricting its ability to spend on health, infrastructure and social programs needed to boost living standards and growth.
Before the bill was presented last month, senior PRI officials said it would seek to raise the tax take by 4 percent of gross domestic product. Yet even before the Senate changed the bill, the government was admitting it was likely to bring in added revenues of barely 2.7 percent of GDP by 2018.
“The (reform) was reduced to a simple tax code focused on more, bigger taxes for those who have always paid,” said Alfredo Coutino, Latin America director for Moody’s Analytics.
The government stepped back from bolder reform after the economy suffered a shock contraction in the second quarter, and sidestepped the unpopular option of levying sales tax on food and medicine, which could have substantially improved revenues. (AGENCIES)
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