MEXICO CITY (Reuters) - Mexico’s government was set to propose a tax reform bill on Sunday that would boost government revenue by 2.9 percent of gross domestic product by 2018, to fund more spending to help lift economic growth.
Below are key aspects of the tax proposal, according to a draft obtained by Reuters:
Steeper income tax rates for higher earners would be introduced. Current maximum rate of 30 percent would be raised to 32 percent for those who earn more than 500,000 pesos ($37,800) a year.
The bill does not plan to extend the country’s 16 percent value-added tax (VAT) to food and medicine. Many had expected processed foods to be taxed, while basic foodstuffs would have been left untouched.
A lower 11 percent VAT rate for border states would be raised to match the national rate. Companies have been able to arbitrage the difference between the rates by falsely claiming they buy inputs at the higher rates and sell at the lower rates when the opposite is the case.
The tax burden on state oil monopoly Pemex PEMX.UL would drop to below 60 percent from 79 percent.
A 10 percent tax on stock market gains and dividends.
New excise taxes would be applied to fuels, pesticides and sugary drinks. Gasoline subsidies would keep being cut through next year. After 2014, gasoline prices would rise with inflation.
Eliminate a regime allowing corporate income tax deferrals as well as simplify the current income tax law to reduce deductions.
An alternative minimum tax, known as the IETU that was introduced in 2008, would be scrapped, reducing the costs for companies to comply with tax responsibilities.
The draft proposes a “transitory” budget deficit of 0 to 0.4 percent of gross domestic product for 2013, and 1.5 percent of GDP in 2014.
Reporting by Mexico City newsroom; Editing by Maureen Bavdek