The Mexican Congress gave the green light on Friday to tax policy reforms, and analysts claim that the importance of this reform is as much political as it is financial.
Specifically, conservative President Felipe Calderon, whose narrow victory in last year’s elections sparked fierce protests from the left, pushed through Congress a reform of the pension and tax system, making more changes in this regard than his predecessor Vicente Fox did in six years in office.
Senators supported the reform package in a vote that followed months of discussions on how to generate state revenues so that the government could invest more in education and infrastructure without relying so heavily on oil revenues. The government wants to reduce this dependence on oil, so the corporate minimum income tax in 2008 will be 16.5 percent, and by 2010 it will rise to 17.5 percent.
Mexico, one of the main producers of crude oil and with close trade relations with the U.S., is likely the most developed economy in Latin America, but with the lowest taxes in the region. It is expected that changes to the tax law will bring more than 10 billion U.S. dollars into the state treasury in the first year. This is the most significant economic reform in the country since the government privatized the pension system for private sector workers in 1997. (Hina)
