SHCP Agreement With Chihuahua Advances Fight Against Tax Fraud
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SHCP Agreement With Chihuahua Advances Fight Against Tax Fraud

Photo by:   Steve Buissinne, Pixabay
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Peter Appleby By Peter Appleby | Journalist and Industry Analyst - Wed, 08/05/2020 - 12:55

Finance Minister Arturo Herrera announced on Tuesday an agreement between the SHCP and Chihuahua state that marks another decisive step in the government’s attempt to clamp down on a tax fraud problem that costs Mexico billions of dollars annually.

Herrera’s announcement came via a video message in which he explained that SHCP and Chihuahua would collaborate to prosecute any tax fraud and other fiscal crimes that are uncovered in the border state, reports El Financiero. The agreement is a win-win for the administration, which is able to detect any company’s avoiding tax, and Chihuahua, which will receive any penalties or missed contributions from a prosecuted company.

“If the states detect any problem based on the audits that they carry, they will notify the Fiscal Attorney's Office, which would litigate and, if charges are made, those resources would go to the state,” Herrera explained. 

Tax evasion is an ongoing problem in Mexico, which, in 2016 alone, cost the country an estimated MX$510 billion (US$22.7 billion) – 2.6 percent of the country’s GDP. According to Chihuahua Governor Javier Corral, shell companies and the buying and selling of invoices are a common problem. The final beneficiaries of tax fraud is organized crime, he said.

The MORENA government has taken an active stance against tax fraud since entering office in December 2018. SAT head Raquel Buenrostro, known locally as the Iron Lady, has been aggressive in chasing down companies that had avoided tax payments. Earlier this year, SAT published a list of 15 major taxpayers that owed a reported MX$50 billion (US$2.23 billion) in outstanding taxes. In May, Walmart reached an agreement with SAT to pay MX$8.79 billion (US$390 million) and was thanked publicly by President Andrés Manuel López Obrador. América Móvil and IBM are among the other companies in dialogue with the government institution.

The federal administration has also moved to improve its tax collection processes among the general public and more success was reported last week as SAT doubled its tax returns for every peso spent in 2H20 in comparison to the first half of last year. In 2H19, the institute recovered MX$72.5 for every peso spent on auditing while in 2H20, SAT received MX$144.5 pesos for every peso spent. According to El Economista, the institution claimed a record collection of MX$269.5 billion (US$12 billion) in 2H20, representing a 177 percent increase in real terms.

Mexico’s economic structure has long posed a problem for tax collection. Almost 60 percent of the population work in the informal sector, though analysts believe that this figure will rise as a result of the large-scale job losses and bankruptcies among the country’s integral MSME businesses.

In 2016, 2017 and 2018, the country’s tax revenue as percentage of GDP amounted to just 16.1 percent, making Mexico the lowest ranked country among OECD members in terms of tax collection revenue. In comparison, Chile’s tax collection represented 21.1 percent of GDP in 2018 while France reported the highest figure with 46.1 percent of the country’s tax revenue as GDP.

Photo by:   Steve Buissinne, Pixabay

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