Tax reform

Ever since I can remember, any discussion about the public purse is always framed within the context of the need for a “real” tax reform. What I have never been clear about is what is meant by “real” because everyone seems to have his or her own definition. It would not be very keen to assert that truth is in the eye of the beholder: Everyone wants everybody else to pay taxes in order for each to maintain one’s exemptions. This contradiction leads us to live in a world similar to the legendary “Ministry of Truth”, of the country invented by George Orwell in his famous novel “1984”: what is said is not what it is meant and the truth is never spoken. Everything is said in “newspeak”, the language invented by Orwell, to denote ways of mixing propaganda with half-truths, so that, at the end of the day, everybody is still clueless.
The paradox could not be more eloquent: we live in a world pretense -fiscal and otherwise-, one in which we never speak with the clarity needed to understand the terms of what is being debated. With respect to taxes we all have our favorite villain, but nobody wants to talk about their own privileges. If we are to believe the rhetoric that pervades the public sphere, agriculture needs subsidies because otherwise it will not survive and therefore farmers should not pay taxes. Writers and actors create exceptional works that deserve tax exemption. The middle classes have been very hard hit, forcing the government to subsidize gasoline, a way of not paying taxes. Businessmen are employers and therefore deserve to be exempted.  Unionized workers exemplify our sovereignty and therefore should enjoy duty-free benefits
It would not be an no exaggeration to say that the common denominator of all these examples is that everyone considers himself an exceptional case and because of this, worthy of tax exemptions. Obviously, no country can function like this: it is not possible to move towards equality, defined as one wishes, while citizens do not feel responsible and, therefore, committed to the country’s progress. Nor is it possible to walk towards development while we all live in our small little world of exceptions. In the tax arena, more than in any other, privileges are counterproductive because they destroy the very essence of citizenship. Unless this basic equality is brought to the forefront, the country will remain mired in an ongoing simulation in which we all pretend to comply but nobody actually does it.
We can criticize our legislators for the tax clunkers they churn out but, regardless of the world of pretense in which they themselves live, it is also true that they have no choice but to respond to the circumstances that surround them and that world is the set of petitioners, self-centered individuals who believe they have entitlements but no obligations, and citizens, all of which believe they are deserving of special treatment. In this context, the pragmatism that characterizes our politicians is not surprising: they try their best to upset the least possible number of interests and hit only those who have no alternative. Their approach is equivalent to walking on a minefield where, as the members of congress learned in recent weeks, it is very easy to get hit.
All this makes me think that the fiscal problem in Mexico is ill-posed. If one looks at the numbers, it is clear that Mexicans collectively pay less taxes than the ones paid in most other countries, the same for developed countries as for the ones similar to ours. The problem is that nobody cares about this fact. What Mexicans care for are not statistics, but the bad public services they get, the waste incurred by our politicians, the perks enjoyed by all sorts of groups, sectors and parties, not to mention the outlandish transfers that are made to the state governors, as well as the Pharaonic slices that are taken by universities, the judiciary, and the security the apparatus.
It is possible that each of the line items of the expenditure budget is justified and merits it, but this is not what the overwhelming majority of the population thinks. That is why the “real” tax reform will never be possible until we have transparent public spending. Public spending in Mexico is a black hole that is allocated in the shadows and is exercised without control. I repeat: it is obvious that much of the spending by the various entities and levels of government is not only necessary, but properly exercised. The problem is that results are unsatisfactory because there are so many signs of excess, corruption and squandering that it becomes impossible for citizens to commiserate with legislators when they are trying their best not to step on land mines when trying to define taxes and public spending.
Until citizens acknowledge the government’s judicious use of public funds they will never agree to pay the taxes that are needed to finance the country’s development. From this perspective, the entire country’s tax logic is reversed: the government (including governors, legislatures, municipalities and the judicial system)  should first have to draft a credible report on how spending is exercised, how it achieved the proposed objectives, or why those objectives were not met and, therefore how it intends to correct its ways. Once that milestone is passed, the government would propose the objectives for the coming year and the budget it would need to fulfill them. Only then, once the previous budget is disclosed and the projects for the following year are discussed, would it be possible to approve the tax bill. Such a process would force the citizens themselves to recognize the urgency of the projects and justify their own privileges.
At the end of the day, in democracy, there is nothing more important or more complex than the allocation of public monies. This is where the two main components of public life come together: the citizens that have to pay the costs of living in a society and those in charge of governing who must carry out the mandate of the citizenry through the budget. What we have witnessed in recent days is merely the demand of citizens for the politicians to account for the Mexican government’s pathetic performance in fulfilling its duties and responsibilities.
Nobody in her right mind can doubt that Mexico needs a comprehensive fiscal reform, but it would have to be comprehensive, i.e. cover both sides of the equation. Without transparency in spending and accountability on the part of those in charge of spending, citizens will never feel compelled and, therefore, will continue to defend their benefits to the grave. That’s what university presidents and governors do on a daily basis. Why not citizens?