UPDATE 1-Mexico's Calderon urges Congress to pass tax reform

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By Jason Lange

MEXICO CITY Aug 17 (Reuters) - Mexican President Felipe Calderon urged lawmakers on Wednesday to hurry to approve a major tax reform proposal as a September deadline looms.

Calderon wants to boost Mexico's paltry tax collection in order to improve the country's subpar schools and roads, and make the economy more competitive.

Senior opposition lawmakers have signaled that a breakthrough could be imminent in talks over Calderon's tax proposal, but time is running out.

Lawmakers must pass the reform by Sept. 8 for it to take effect next year. Calderon is stepping up pleas for the bill's approval, which would amount to a major legislative victory and could pave the way for further economic reforms.

"Again, I invite and respectfully urge lawmakers to finish deliberations over fiscal reform. ... Mexico does not have time to lose," Calderon said in a speech before college students.

Calderon's plan would increase Mexico's tax take by 2.8 percent of gross domestic product, largely through a minimum income tax for companies.

The president's conservative party, however, lacks a majority in Congress and needs votes from the opposition Party of the Institutional Revolution, or PRI.

Mexico currently brings in taxes worth about 10 percent of gross domestic product, one of the lowest rates in Latin America. Economists say Mexico will face serious financial problems if it does not lower its dependence on faltering oil production, which pays for about a third of the federal budget.

Finance Minister Agustin Carstens said on Tuesday the government was fine-tuning the bill to win over the PRI, which wants changes to protect workers' jobs.

The PRI also is asking for separate measures to revamp elections laws and give state oil firm Pemex a multibillion dollar tax break.

Calderon warned that not passing the reform soon would leave schools, hospitals and highways underfunded next year.

"We need to settle what we can agree on once and for all," Calderon said.