Mexico finance minister says tax reform will seek more from rich

MEXICO CITY Tue Jan 29, 2013 7:59pm EST

MEXICO CITY Jan 29 (Reuters) - The Mexican government's plan to increase taxes would collect more from the country's wealthiest and close loopholes that allow companies to cut their fiscal burden, Finance Minister Luis Videgaray said on Tuesday.

Mexico has one of the lowest tax takes in Latin America, and President Enrique Pena Nieto has pledged to expand the fiscal base to help fund investment and improve economic growth.

One measure being considered could levy value added tax (VAT) on food and medicine, which have been exempt. That could channel billions of dollars into Mexico's coffers.

The ruling Institutional Revolutionary Party, or PRI, is treading carefully with VAT reform because of the impact it would have on the poor, who make up roughly half the population.

In a news conference after a meeting of PRI lawmakers in Mexico City, Videgaray said the tax system had become skewed over time and needed to be revamped.

"Those earning more will need to pay more," Videgaray said, noting his government planned to review the income tax regime.

Videgaray stressed that the government aimed to overhaul rules that allow companies domiciled in Mexico to offset the losses of some group subsidiaries against the profits of others.

Critics say the regime, known as "fiscal consolidation" in Mexico, allows companies to avoid paying tax. Its supporters say the system helps to attract investment to Mexico.

The government is also planning to beef up its finances by levying tax from the vast underground economy, which accounts for nearly one-third of the workforce.

Pena Nieto has said he expects the reform to be presented to Congress and passed before the year is out. (Reporting by Dave Graham and Miguel Gutierrez; Editing by Stacey Joyce)

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