Tags: Mexico | mexico | tax | overhaul | debate

Mexican Senate Debates Final Details of Tax Overhaul

Wednesday, 30 Oct 2013 07:02 AM

 

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MEXICO CITY — Mexican senators Wednesday debated parts of a tax overhaul aimed at boosting government revenues, and were not expected to significantly weaken a cornerstone of President Enrique Pena Nieto's economic reform agenda.

The Senate approved the broad outline of the bill late on Tuesday and embarked on a marathon debate through the night over parts that opposition lawmakers have sought to knock down or change. The bill would have to return to the lower house of Congress if they make changes.

The bill, which raises top income tax rates for the wealthy, slaps levies on sugary drinks and junk food as well as a charge on stock market gains, seeks to raise tax revenue by nearly 3 percent of economic output by 2018.

Pena Nieto is pushing through a series of reforms also taking in the telecoms and energy sectors that he hopes will help boost a growth rate that has lagged that of other emerging markets.

The lower house watered down Pena Nieto's bill earlier this month, throwing out some planned levies amid an economic slowdown. They also raised the top income tax rates to push more of the burden onto the country's richer citizens.

Lawmakers were considering calls to raise a planned levy on junk food from 5 percent to 8 percent. Junk food is defined as products that contain more than 275 calories per 100 grams, which would hit chocolate in the land that gave it its name.

An 8 percent tax on junk food would raise about 5.6 billion Mexican pesos ($435 million) a year, lawmakers said, or less than 0.04 percent of GDP.

Opposition conservatives fought against much of the bill and have been pushing hard to strip out a measure to raise the value-added tax (VAT) rate for states on the U.S. border to 16 percent from a reduced rate of 11 percent they currently enjoy.

The changes made to the tax bill by the lower house in mid-October created a shortfall in the budget plan for next year.

That prompted lawmakers to raise the government's oil revenue estimate and make other changes to close the funding gap. These are due to be voted by the Senate on Wednesday.

The tax bill is tied to the 2014 budget, which must be approved by mid-November.

The last major reform pending in Congress is the president's planned overhaul of the state-controlled energy sector, which the government hopes will attract investment, help stem a slide in oil output, and power economic growth.

Pena Nieto proposed an energy revamp in August that would loosen the grip on the sector of state oil monopoly Pemex and offer private companies profit-sharing contracts.

If approved as presented, this would mark the largest opening of the energy sector to the private sector in decades.

However, the reform has stopped short of offering production-sharing contracts or concessions that oil majors had been hoping for, and many viewed it as cautious.

Some lawmakers believe the energy plan could still be amended to attract more investment.

© 2014 Thomson/Reuters. All rights reserved.

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