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Mexican Tax Reform Proposals To Be Ready By July 2013

by Mike Godfrey,, Washington

11 December 2012

Following the previous disclosure from a top adviser to Enrique Peña Nieto that one of the first policies to be initiated by the new President of Mexico would be tax reform, Manlio Fabio Beltrones, coordinator of the President’s party in the House of Representatives, has indicated that such tax proposals can be expected in July next year.

During a speech on December 7, 2012, Beltrones did not provide any details of the measures that could be contained in the proposed tax reforms, except to say that they should raise the government’s revenue-to-gross domestic product (GDP) ratio by some 2% or 3% from its relatively-low present level, reduce the dependence on oil revenues, and provide funds to develop the country’s social security system.

Others, and the International Monetary Fund (IMF) in particular, have already pointed out that, due partly to its very narrow tax base, Mexico’s total tax ratio is not much more than half of the OECD average – 18% of GDP compared with 34% - but much less if oil revenues are excluded, and have called for revenue-enhancing reforms as soon as possible.

In their reply to the IMF, the Mexican authorities concurred with the need to mobilize non-oil revenues, and took note of the IMF’s proposals to re-establish a positive excise tax on gasoline prices by reducing subsidies, and to broaden the tax base for value-added tax, possibly by its extension to food and medicine.

In addition, they agreed that income tax reform, including the elimination of loopholes and special corporate tax regimes, should also be a priority. Amid low income taxes and social security contributions, the tax structure in Mexico still depends significantly on indirect taxation on goods and services.

TAGS: tax | value added tax (VAT) | corporation tax | Mexico | social security | tax breaks | tax reform | individual income tax | services

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