| | |  Business News | May 2009 
Mexico Needs "Urgent" Tax Reform Plan - Ortiz
 Jason Lange & Luis Rojas Mena - Reuters
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| | Central bank Governor Guillermo Ortiz | |
Mexico City - Mexico needs to quickly come up with a plan to tackle its growing fiscal problems, central bank Governor Guillermo Ortiz said on Monday, as Mexico struggles with a low tax take and sliding oil revenues.
Standard & Poor's placed Mexico's credit rating on review last week with an eye to a possible downgrade, citing the country's heavy reliance on oil sales and doubts over the political will of the government to boost non-oil tax revenues despite sliding crude output.
"It is really urgent that once we are through the elections that a medium-term fiscal program be designed and passed," central bank Governor Guillermo Ortiz said, referring to mid-term congressional elections in early July.
"Obviously, raising taxes in the middle of a recession is not a good idea, but it is fundamental that we have a medium- term project of fiscal consolidation," he told a conference.
Finance Ministry Agustin Carstens has acknowledged the need for fiscal reform, but has not revealed any details of his proposals.
Income and sales taxes account for only 8.8 percent of Mexico's gross domestic product, less than half the average level of developed nations and below the 11.3 percent average in Latin America, Ortiz said.
Mexican oil production has fallen more than 20 percent since peaking in 2004.
The fiscal effects of the drop in oil exports, which pay for more than a third of the federal budget, have yet to be felt strongly because of soaring oil prices and a hedging facility put in place for this year that guarantees Mexico will receive $70 a barrel for its exports.
However, the hedge expires at the end of this year and oil export volumes are forecast by the government to drop 18 percent in 2010, implying a heavy hit to next year's revenues.
(Editing by Jan Paschal) |
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