| MEXICO CITY, Sept 3
MEXICO CITY, Sept 3 Mexico's government is
poised to break a taboo and tax some foods and medicine under an
tax overhaul proposal but will take measures that shield the
country's poorest, ruling party lawmakers said on Tuesday.
The bill will also very likely propose raising the top
income tax rate for the wealthiest to as much as 40 percent from
30 percent, several officials from President Enrique Pena
Nieto's Institutional Revolutionary Party (PRI) said on
condition of anonymity.
One of the key planks of a wider economic reform program
aimed at boosting economic growth, the proposal is set to be
unveiled by Pena Nieto on Sunday along with his 2014 budget.
It aims to raise the country's paltry tax take - which was
just 9.7 percent of GDP in 2012 excluding state oil monopoly
Pemex - by four percentage points, in part by changing
the tax regime for food and medicine, seen by the left as key to
protecting Mexico's poor.
It also seeks to gradually wean the state off dependence on
revenues from Pemex to fund the federal budget.
Mexico has the lowest tax revenue in the 34-nation
Organization for Economic Co-operation and Development, crimping
its ability to spend on health, infrastructure and social
programs vital to boost living standards and growth in Latin
America's No.2 economy.
The government slashed its 2013 growth outlook to 1.8
percent last month after the economy contracted in the second
quarter for the first time in four years, and any tax changes
will be phased in gradually, lawmakers said.
"There is no need to worry that we would be so insensitive
to not note the economic cycle and approve a reform that,
instead of being good for speeding up growth in the country,
sinks it into a slowdown," said a senior PRI lawmaker.
Several ruling party lawmakers said Mexico's poorest would
be compensated for any change in VAT on food and medicine,
probably through their registration on social programs.
"I think there will be good news for those people who have
less. For those who need daily medicine, those medicines will
not be taxed," PRI Chairman Cesar Camacho told news network
EXEMPTION FOR FOODSTUFFS
Basic foodstuffs such as corn, milk and beans, are likely to
be exempt from a VAT increase, lawmakers said.
The government is also weighing raising taxes on goods like
cigarettes, alcohol and soft drinks, lawmakers said on condition
of anonymity given political sensitivities.
A flat tax called IETU, which is calculated on a cash flow
basis and which critics say adds a layer of complication to
filing taxes, will be scrapped, said two PRI lawmakers familiar
with the government's plan.
The bill will also impose a tax on financial transactions,
two senior PRI officials said, without elaborating on what kind
of transactions. Officials have previously said the government
is considering imposing a capital gains tax on stock market
Government officials say that the rich should pay more and
that the reform program will close tax loopholes, but have kept
silent about its contents.
The government has already presented a proposal to overhaul
Pemex to lure private-sector investment in the ailing oil
sector, as well as bills to overhaul competition in the telecoms
sector, boost bank lending and improve education standards.
However, it is grappling with mass protests by teachers
opposed to the idea of competency tests. Fiery leftist Andres
Manuel Lopez Obrador, who was runner up to Pena Nieto at last
year's election, plans a march over the tests on Sunday he hopes
will eclipse protests he led in 2006 that brought the capital to
(With reporting by Anahi Rama; Writing by Simon Gardner;
Editing by Philip Barbara)