One of the premises of the federal government’s tax reform is tackling informality. Nevertheless, the changes planned correspond to readjusting taxing mechanisms in the opposite side of this intention. The Executive proposal seeks to recollect more funds through the transfer of public resources to the basis that has always been captive taxpayers. Likewise, regardless that the initiative offers a few “incentives” – specially focused on social security – to those offered in the informal sector (6 out of every 10 Mexicans of the economically active population) with the aim of promoting the incorporation to formality, seems that the deterrence given the tax burden suffered by the main economic engines: private companies and the middle class.
Mexico is one of the most inefficient countries recollecting taxes. Only 40% of the economically active population is incorporated to a regular tax regime or, in other words, 28 million people do make their declaration to tax authorities. It is worthy to underline that the aforementioned “informal” individuals do pay taxes, even if they only include consumables (such as VAT) or those within the prices of some products (for example, the Special Products and Services Tax placed on alcohol and tobacco). In that sense, if new taxes have been proposed under euphemistical formulas such as the “ecological” tax to fuel (8 monthly cents) or the tax “against obesity” of one peso per liter to sugary drinks, the majority of the fiscal burden will fall under those who pay the income tax (ISR) and other taxes that are controlled. The physical and moral persons registered and without the capacity of using mechanisms of avoidance (accountability engineering, designed to take advantage of technical loopholes with the aim of reducing its contributions) or evasion, will continue to carry on their shoulder the bulk of non-oil revenues. This will be aggravated if new limits on deductibles are approved, the redefinition of limits within mortgage taxes on production and services that, according to the criteria of tax authorities, show enough purchase power. This will also be enhanced by the disappearance of the Regime of Small Taxpayers (Repecos), that even though it was used abusively in cases of tax avoidance, it does constitute a backup for the entrepreneurial and incoming middle class.
One of the results of macroeconomic stability enjoyed in the last couple of years as well as the gradual decrease on costs of essential goods due to the liberalization of imports and the opening of new markets, has been to let thousands of families reach those goods that were previously exclusive of middle class. In that sense, the reform might turn out to be regressive. According to figures provided by the Center of Economic and Budgetary Research (CIEP), those who are most affected by VAT changes can be observed between the first and seventh places; those ranked among the third and fourth are the most aggravated (6.6% and 6.8%, respectively).
Informality in an outlet through which thousands of families have adhered, generating a vicious cycle that shows an authority that is comfortably installed in the results of captive recollection, but cautious when tolling the line for those who evade or elude the law. Signs issued by the new proposal of tax reform seem to indicate that the current government puts the thickening of its bureaucratic and electoral clients before an economically sustainable and responsible program. The decision of not increasing the taxable basis as well as not adjusting ISR under a scheme of enhancement of productivity and not only tax collection, seem to be more like political measures instead of a boost to “drive Mexico forward”.
CIDAC
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