FACTBOX-Mexico tax reform debate, proposals

Oct 12 (Reuters) - Mexican lawmakers are debating President Felipe Calderon's proposal to raise taxes and lower the government's dependence on Mexico's declining oil industry.

Calderon is trying to head off a threatened downgrade of Mexico's debt rating, but the conservative leader needs support from the opposition to pass his proposal.

The cornerstone of the plan is a new 2 percent sales tax on all products, including currently exempt food and medicine. Calderon also wants to raise income taxes.

Congress has an official deadline of Oct. 31 to pass new tax measures for next year.

The following are the latest developments compiled from Reuters stories and Mexican media reports:

* The dominant opposition party, the Institutional Revolutionary Party, or PRI, is expected to release details of its fiscal counter-proposal by late Monday or early Tuesday.

The PRI has said they want to deepen spending cuts by cutting back on bureaucrat salaries while still boosting spending on infrastructure.

Lower house lawmakers have until an Oct. 20 deadline to approve the revenue side of the budget, as well as any tax changes, in order to hand the bill to the Senate, which must pass the legislation by the end of the month.

* Mexican business leaders are insisting that the government trim the budget before raising taxes, local media reports. Specifically, business interests want a tax break for new investment to be a part of any new revenue package.

* The new tax plan will drive up costs for airlines, hotels and other hospitality services and seriously dampen the tourist trade in Mexico City, the capital city's head of tourism told El Universal newspaper.

* Opposition parties plan to raise the average oil price projected in the 2010 budget by several dollars to increase expected income and ease the need for new taxes. Calderon's proposal counts on less than $54 per barrel, while many analysts see oil prices averaging closer to $60 per barrel.

* Leaders of Calderon's conservative National Action Party, or PAN, said they are willing to make basic foodstuffs and everyday medicines exempt from the new tax.

* The main opposition parties are considering a joint proposal that would raise income tax rates for high-earners, Excelsior newspaper reported.

(Compiled by Patrick Rucker and Michael O'Boyle in Mexico City)