Mexican Finance Minister Says Tax Reforms 'A Step Forward'

by Robert Lee, Tax-News.com, London

09 January 2002

Speaking on Monday, Mexican Finance Minister Francisco Gil Diaz stated that the tax package recently passed by Congress marks a 'step forward' for the Mexican economy.

The package, which has been the subject of controversy since its inception, only raises around half of the funds needed by the administration. However, addressing a news conference earlier this week, Mr Gil Diaz urged Mexican citizens to look at the bigger picture:

'It's a net favourable result,' he explained. 'One should look at the net result and see the forest and not the trees.'

Although Congress approved new taxes on telephone services, soft drinks, and cigarettes, and voted to end certain corporate tax breaks and subsidies, President Vicente Fox's original plan to impose a 15% VAT charge on foodstuffs, medicines and other zero VAT items was scrapped, as it was believed that this would place too much of a burden on the country's poorer citizens.

The somewhat diluted tax reform package may not be able to release public finances from their dependence on the oil industry to quite the same degree, but experts feel that it may still prove enough of a change to convince debt rating agency, Standard & Poor's to upgrade the country to investment-grade status. This would open Mexico up to further foreign investment, and improve its trade relationship with the United States significantly.

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