Mexico - Country Economic Memorandum : Challenges and Prospects for Tax Reform
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Washington, DC
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Over the last ten years, the need for
sustainable tax revenues has become clear, in order to
provide more public expenditures in areas such as, poverty
alleviation, health, education, and infrastructure, as well
as for payment of the recent social security reform, and
banking sector support. The report examines the key problems
in Mexico's tax, and revenue system, identifying
administration as the weakest factor in its tax system,
where such weakness has contributed to political resistance
in broadening the tax base. In addition, the system relies
heavily on oil revenues, only about thirty percent of the
total, and dependent on world prices, thus, the rest of the
economy will have to bear a larger tax burden as a share of
GDP. Meanwhile, various exemptions, and special regimes
erode the base of the most important taxes - Value Added Tax
(VAT), corporate, and personal income taxes, and, most tax
decisions, and the derived political consequences, continue
at the national level, while the delivery of services is
increasingly devolved to sub-national levels. Within the
reform options, the most relevant fall in three areas:
national tax policy, administration, and inter-governmental
fiscal relations, where the central theme is to improve
revenue capacity, efficiency, and horizontal equity of the
system, by simplifying laws, eliminating exemptions, and
facilitating compliance, and enforcement. Such reform
strategy will be successful if implemented in a coordinated
way, by reducing evasion, and improving collection; by the
already implemented income tax reform (end of 2001),
although the VAT and petroleum taxation remain on the agenda
for future action; and, by the State cooperation in the tax
reform program, to improve enforcement, particularly the VAT.
Palabras clave
COUNTRY ECONOMIC WORK, TAX REFORMS, PUBLIC EXPENDITURES, TAX REVENUES, POVERTY ALLEVIATION MECHANISMS, HEALTH CARE DELIVERY, EQUITY IN EDUCATION, INFRASTRUCTURE DEVELOPMENT, SOCIAL SECTOR REFORM, SOCIAL SECURITY SYSTEMS, BANKING SYSTEMS, SOCIAL SECURITY FINANCE, ADMINISTRATIVE CAPABILITY, POLITICAL CONSTRAINTS, TAX BASES, OIL REVENUES, TAX BURDENS, TAX EXEMPTION, VALUE ADDED TAXES, CORPORATE TAXATION, PERSONAL INCOME TAX, REFORM POLICY, FISCAL CONSOLIDATION, LEGAL FRAMEWORK, LAW ENFORCEMENT ACCOUNTABILITY, ACCOUNTING, ADVERSE EFFECTS, AGRICULTURE, ALLOCATION OF RESOURCES, AUDITING, BANKING SECTOR, BASIC EDUCATION, BUDGET EXPENDITURES, BUDGET PROCESS, BURDEN OF TAXES, CAPITAL GAINS, CAPITAL MARKETS, CASH-FLOW, CITIZENS, CONSTITUTION, CONSUMERS, CONSUMPTION TAXES, CORPORATE INCOME TAX, CORRUPTION, CROWDING OUT, DEBT, DECREE, DEMOCRATIC PROCESS, DEVOLUTION, DIVIDENDS, DRINKING WATER, ECONOMIC COOPERATION, ECONOMIC EFFICIENCY, ECONOMIC GROWTH, ECONOMIC SECTORS, EQUALIZATION, EVASION, EXCISE TAXES, EXPENDITURE RESPONSIBILITIES, EXPENDITURES, EXPORTS, FACTORING, FEDERAL GOVERNMENT, FINANCIAL RESOURCES, FISCAL, FISCAL DEFICIT, FISCAL INCENTIVES, FISCAL MANAGEMENT, FISCAL POLICY, FISCAL PROBLEMS, FISCAL REFORM, FOREIGN INVESTMENT, FREE TRADE, GDP, GOVERNMENT RESOURCES, GOVERNMENT REVENUES, GOVERNMENT'S BUDGET, GROSS NATIONAL PRODUCT, GROSS REVENUE, GROSS REVENUES, HEALTH SERVICES, HORIZONTAL EQUITY, HUMAN DEVELOPMENT, HUMAN RESOURCE, HUMAN RESOURCE DEVELOPMENT, HUMAN RESOURCES, INCOME, INCOME GROUPS, INCOME INEQUALITY, INCOME LEVELS, INCOME SUPPORT, INCOME TAXES, INDEXATION, INEFFICIENCY, INFLATION, INFORMAL SECTOR, INSTITUTIONAL DEVELOPMENT, INTEREST INCOME, INTEREST RATE, INTEREST RATES, INTERGOVERNMENTAL FISCAL RELATIONS, INVENTORY, LABOR MOBILITY, LAWS, LEGAL PROVISIONS, LEGISLATION, MANDATES, MUNICIPAL PROPERTY, MUNICIPALITIES, NATIONAL LEVEL, NATIONAL TAXES, NET WORTH, OIL, OIL PRICES, OIL SECTOR, OPERATING COSTS, PENALTIES, PER CAPITA INCOMES, PERSONAL INCOME TAXES, POSITIVE EFFECTS, POVERTY ALLEVIATION, PRICE DECLINES, PRICE FLUCTUATIONS, PRIVATE SECTOR, PROVISIONS, PUBLIC EXPENDITURE, PUBLIC HEALTH, PUBLIC SECTOR, PUBLIC SERVICES, PUBLIC SPENDING, RESOURCE USE, RETAIL SALES TAX, RETAINED EARNINGS, RETIREMENT, REVENUE CAPACITY, REVENUE COLLECTION, REVENUE GROWTH, REVENUE SOURCES, ROYALTY, SALES TAXES, SOCIAL PROGRAMS, SOCIAL SECURITY, SOCIAL SECURITY REFORM, SOCIAL SERVICES, SUBNATIONAL GOVERNMENTS, SUBSIDIARIES, SUBSIDIARY, TAX, TAX ADMINISTRATION, TAX ADMINISTRATIONS, TAX AUTHORITY, TAX BURDEN, TAX BURDENS, TAX COLLECTION, TAX COLLECTIONS, TAX COMPLIANCE, TAX EXPENDITURES, TAX LAW, TAX OBLIGATION, TAX OBLIGATIONS, TAX PAYMENTS, TAX POLICY, TAX RATE, TAX RATES, TAX REFORM, TAX REFORMS, TAX RETURNS, TAX REVENUE, TAX REVENUES, TAX SYSTEM, TAXATION, TECHNICAL ASSISTANCE, TOTAL REVENUE, TRANSACTION COSTS, TRANSPARENCY, TRANSPORT, VALUE ADDED, VALUE ADDED TAXES, WAGES, WEALTH