Photo: Mexican President Peña Nieto
Mexican President Enrique Peña Nieto unveiled a series of tax and economic measures aimed at increasing tax collection, boosting economic growth and expanding the social safety net.
Peña Nieto announced the economic policy initiatives in an address Sunday that followed the presentation of the 2014 budget to Congress.
“Tax reform is social reform,” Peña Nieto said during the 30-minute speech at the Los Pinos presidential residence, where officials and political leaders gathered.
The policy changes are being introduced amid a slowdown in Mexico’s economic growth in the first half of the year that has forced officials to revise GDP forecasts downward.
The tax reforms are wide-ranging and designed to create a “fair, simple and transparent” system, Peña Nieto said.
The value-added tax (VAT) will not be imposed on food and medicines, and the rate will be maintained at 16 percent, the president said.
The plan calls for eliminating the IETU tax and the tax on cash deposits, while imposing a 10 percent tax on business income and securities trading profits, Peña Nieto said.
The top income tax rate, which is currently 30 percent, would rise to 32 percent, but tax returns would be simplified and informal employment would be targeted with a series of measures and incentives, the president said.
“Those who make the most will pay more,” Peña Nieto said.
The president is asking Congress to expand Mexico’s social safety net by creating an unemployment insurance program financed by employers that would allow jobless people to receive benefits for up to six months.
Peña Nieto, moreover, is proposing the establishment of a universal retirement program for those older than 65 to replace the current system, which has many restrictions and is financed by the government.
The president is calling for the creation of a system of “green taxes” targeting fuels on the basis of how dirty they are and the gradual elimination of subsidies for gasoline.
Peña Nieto’s plan also taxes sugary beverages as part of an effort to fight obesity and changes the tax structure of state-owned oil giant Pemex so it will be “like any other oil company in the world,” allowing the energy firm to make bigger investments.