MEXICO CITY, Sept 8 Mexican President Felipe
Calderon asked Congress on Tuesday to raise taxes and slash
spending on government bureaucracy to prop up public finances
as the country languishes in a deep recession. .
Here are some details on the proposals:
NEW SALES TAX
A new 2 percent tax would be levied on all sales, without
the exceptions that apply for existing taxes. Food and medicine
are currently exempt from the nation's 15 percent VAT tax.
Raising taxes on food is very unpopular in Mexico, where about
one in five people are so poor they struggle to eat enough.
The new tax would seek to collect around 70 billion pesos
($5 billion) next year.
HIGHER INCOME TAX
The proposal also seeks to temporarily increase the maximum
income tax rate to 30 percent from 28 percent at present.
HIKES ON TOBACCO, ALCOHOL, GAMBLING
Taxes on cigarettes, liquor and gambling -- including
lottery tickets -- would rise. The proposal suggests adding 80
centavos on a pack of cigarettes, with further rises in
subsequent years, and a rise in the tax rate on beer to 28
percent, with further rises in the next few years. Taxes on
gambling would jump to 30 percent from 20 percent now, and 3
pesos per liter would be added to the tax on spirits.
HIGHER CASH DEPOSIT TAX
Cash deposits in banks would be taxed further to clamp down
on street vendors and small businesses that don't report cash
transactions to authorities and avoid taxes. Deposits of more
than 15,000 pesos per month would pay a 3 percent tax, an
increase from a law passed earlier in Calderon's term that
levies 2 percent on deposits of more than 25,000 pesos.
NEW TELEPHONE TAX
A 4 percent tax would be added to public telecoms services,
with exemptions for people living in rural areas.
END TO FUEL SUBSIDIES
The government would ease back from its practice of
Calderon shied away from making any major proposals to
change existing VAT levies, which exempt food and medicine.
Analysts and business chambers want to see the exemption
ended to increase the tax base. But increasing this rate is
very unpopular among politicians, since the poor spend
proportionally more of their income on food and medicine.
NARROWER FISCAL DEFICIT
The government wants a budget deficit equal to 0.5 percent
of gross domestic product, down from this year's expected
deficit of around 2 percent.
Calderon wants 80 billion pesos in government spending
cuts. Three government ministries - tourism, agrarian reform
and the comptroller - will be eliminated, while salaries will
remain capped and Mexican embassies will face steep cuts.
(To read the latest story on Calderon's proposals, click on
(Compiled by Michael O'Boyle and Jason Lange)