| | |  News Around the Republic of Mexico | September 2009 
Mexico Opposition Divided Over Government's Tax Plan
 Michael O'Boyle - Reuters
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September 12, 2009
Mexico City - Mexico's chief opposition party is divided over a proposed sales tax that is at the heart of President Felipe Calderon's fiscal reform plan, the party's leader in the lower house of Congress said on Friday.
Calderon's plan, submitted to Congress on Tuesday together with a 2010 budget proposal, also would increase income tax rates. The bill aims to cope with a sharp drop in oil exports and the deepest economic downturn since the Great Depression.
The Institutional Revolutionary Party, or PRI, called the plan "worrisome" on Thursday in a statement from the party's lower house leadership. Some PRI lawmakers predict the sales tax plan will founder.
But the PRI's lower house leader, Francisco Rojas, said the PRI still does not have a position on the sales tax.
"There are different views in the PRI, which we are going to try to bring together and have a single position," he told reporters at a meeting between the PRI and finance ministry officials.
The ruling conservatives cannot get the tax plan through Congress without votes from the PRI, which became the biggest party in the lower house after winning a mid-term election.
Rating agencies have threatened to downgrade Mexico's investment-grade debt rating if it does not reduce its dependence on oil, which funds over a third of the federal budget and has long served as a crutch for the country's weak tax system.
Mexican tax collection is among the lowest in Latin America.
Currently, food and medicines are exempt from taxes, and opposition lawmakers say including such items would hurt the poor.
"For us there is apparently no possibility of this (sales tax being approved)," PRI lawmaker Oscar Levin told Reuters.
Levin, who will likely participate in the lower house finance committee's tax reform talks, also said the PRI would seek a bigger federal budget deficit for 2010 than proposed by Calderon.
He said the PRI will also push for deeper spending cuts and a higher forecast for Mexican oil for 2010 than the $53.9 per barrel proposed by Calderon.
Calderon is promising to spend new tax revenues on welfare programs for the poor, but the PRI says tax increases will stoke inflation and hurt poor families' purchasing power.
(Reporting by Michael O'Boyle; Editing by Dan Grebler) |
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