Mexican Tax Revenue Hits 10-Year High

Mexico’s Tax Administration Service (SAT) reported that last year, tax revenue as a percentage of the GDP reached its highest point in the last 10 years, exceeding 14 percent, according to La Jornada.

Despite the negative effects derived from the COVID-19 pandemic in Mexico, tax collection added up to MX$3.34 trillion (US$163.6 billion) during 2020, reported Milenio. Gabriel Yorio, Deputy Minister + of Finance and Public Credit (SHCP), called this a “notable feat, as it stands out from other periods of crisis such as 1995, when despite the increase in the value-added tax, tax income decreased by 2 percent,” according to El CEO.

In 2020, tax revenue was 5.5 times higher than oil revenue, according to SHCP. Income tax (ISR) revenue, Value Added Tax (IVA) and other taxes accounted for 62.5 percent of total government revenue, while oil income accounted for 11.3 percent, according to El CEO. Throughout the year, for every Mexican peso invested by the government there was a MX$124.4 (US$6.08) profit, making this the largest profitability ever recorded, reports Expansión.

"By focusing on tax evasion and reforms beforehand, we benefited during COVID-19," declared Yorio, during his participation in the launch of the Global Report on Public Finance Management, prepared by the Public Expenditure and Financial Accountability (PEFA), according to El Economista. Yorio explained that all throughout last year, there was a focus on strengthening collection efficiency by combatting tax evasion. “Tax collection has been optimized without increasing or creating new taxes. This has been accomplished due to the Mexican government’s strategy,” Yorio said, according to Milenio. He did say, however, that if Mexico had a better level of digitalization, the country would have had a larger capacity to maintain or improve tax services.

Mexico’s numbers contrast those of other Latin American countries. According to Carlos Pimenta, Specialist from the Inter-American Development Bank (BID), throughout the year many countries in the region saw tax recollection fall while public spending increased, mostly due to their efforts to help citizens throughout the crisis, reports el Economista. He also highlighted the importance of designing and approving policies that evaluate public finance. “The pandemic created a very significant fiscal imbalance all throughout Latin America and the Caribbean. We will exit this pandemic with more poverty, more inequality and bruised public and business sectors,” said Pimenta, according to El Economista.