On the evening of Sunday September8th, President Enrique Peña Nieto announced his government’s much awaited fiscal reform package, which he had sent to the nation’s congress earlier that day. To the surprise of many, the proposal was ambitious, far-reaching and opted not to apply the national sales tax (IVA) to food and medicine, which had been seen by many as the only viable option available for raising tax revenue for the government. Mexico suffers from one of the lowest tax takes of all the OECD countries, with non-oil tax revenue reaching only 12-13% of GDP. Even when combined with substantial monies collected from the national oil company, Pemex, government revenue in Mexico has only been able to reach a paltry 19% of GDP.
The fiscal reform package laid out by the government is focused on increasing revenue, increasing government spending on social programs, and on forcing the wealthier elements of Mexican society to pay more taxes. The government has promised to provide universal social security and pension coverage, unemployment insurance, universal health care and increased spending on education. Each of these will be embodied in a constitutional reform. Pemex will also see a reduced tax rate, falling from 70% to 60%.