| | |  Business News | October 2009 
Mexico’s Opposition PRI Split on Calderon 2% Tax Plan
 Adriana Lopez Caraveo & Jens Erik Gould - Bloomberg
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October 10, 2009
Mexican lawmakers from the largest party in the lower house of Congress are divided over President Felipe Calderon’s proposal to create a new 2 percent consumption tax, legislator Jesus Alberto Cano Velez said.
Some members of the Institutional Revolutionary Party, whose support Calderon needs to win approval for his plan, favor rejecting the levy, while others say the tax will be approved with modifications, said Cano Velez, who is a member of the finance and budget committees in the lower house.
“This is the most controversial,” Cano Velez said in an interview about the tax. “There’s no decision. It’s being analyzed.”
Calderon’s proposals, which he submitted to legislators on Sept. 8 along with his 2010 budget, seek spending cuts, a wider deficit and tax increases as revenue falls because of declining oil output and the recession. The 2 percent sales tax is dubbed an “anti-poverty” levy because its proceeds would fund social programs.
Cano Velez said he expects the 2 percent tax to be approved. The PRI may modify the types of programs the government can invest in with the proceeds, he said.
Other PRI lawmakers in the 500-member lower house, such as Sofia Castro, reject a 2 percent tax, especially if it applies to sales of food and medicine.
“It won’t pass,” Castro said in an interview. “In food and medicine it’s definitely dead.”
A 4 percent tax on telecommunications services proposed by Calderon may also be “difficult” to pass, Cano Velez said. Calderon is also seeking new taxes on beer, gambling, the lottery and tobacco.
Standard & Poor’s, which gave Mexico’s foreign-currency long-term debt an investment-grade rating in 2002, said it may cut its current BBB+ credit rating before the end of the year depending on the tax laws Congress enacts. Both S&P and Fitch Ratings have a negative outlook on their ratings for Mexico, the third-lowest investment grade.
To contact the reporter on this story: Jens Erik Gould in Mexico City at jgould9(at)bloomberg.net; Adriana Lopez Caraveo in Mexico City at adrianalopez(at)bloomberg.net
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