The New Tax Reform Will Expand the Tax Base and Fight Evasion

Aiming to improve collection, expand the tax base and prevent tax evasion, the Ministry of Finance and Public Credit (SHCP) is planning a fiscal reform, Deputy Minister Gabriel Yorio said yesterday. Focus groups are being carried out with different sector representatives to fix the new revenue scheme, aimed at ruling out a tax increase. “President López Obrador asked not to increase taxes and we won’t do it,” said Yorio.

Mexico has a long way to go to fight tax evasion and increase tax revenue  to benefit the Gross Domestic Product (GDP). Among the OECD’s 36 country members, Mexico records the lowest collection of tax in proportion to the GDP with 16.1 percent,  far from France’s top-placed 46.1 percent and  the 34.3 percent averaged by the organization’s country members.

Without giving detailed information on the process timeline, Yorio stressed the need to reduce gaps in laws against tax evasion. According to the deputy minister, other priorities for the tax reform are fighting informality, promoting financial inclusion and reducing the use of cash, for which they are working with retail organizations and the Association of Banks of Mexico (ABM) among others. “There is a lot of lobbying left to do,” Yorio said.

Big Contributors Under Spotlight

According to SHCP data, all types of tax credits (or fiscal debt) total MX$712.4 billion (approx. US$37.4 billion), 32.5 percent of which is concentrated among “large taxpayers”, which are companies or businessmen with large operations and profits.

Of the 46,539 “large taxpayers” registered in SAT, there are 37,725 businessmen and 8,814 companies. They represent barely 0.06 percent of the 77.4 million registered taxpayers, but total for almost one third of the total debt.

Raquel Buenresotro, head of the Tax Administration Service (SAT), has been active in recent days requesting that companies like Alsea, Walmart and Maxom pay taxes for past years’ operations.

Experts says Buenresotro is going to fight hard to get the MX$231.7 billion (approx. US$12.22 billion) owed from large players in tax credits, which would breathe life into the country’s public finances.