In Mexico it is necessary to discuss a Tax Reform where the wealth tax is contemplated to mitigate the ravages of economic inequality, and that with the covid-19 pandemic increased, according to experts at the presentation of the Oxfam report “Who pays the bill? The myths behind taxes on large fortunes” in the Chamber of Deputies.
Gerardo Esquivelformer deputy governor of Bank of Mexico and now a professor at the Colegio de México (Colmex), said in his participation that a progressive tax reform is necessary in Mexico due to fiscal pressures on public finances.
“Demands are many, but resources are few. Even with an increase in the resources allocated to public investment for the projects of this administration, it is insufficient and in the future it will be insufficient because we will have additional fiscal pressures”, said the professor at Colmex.
within the tax expenses, Esquivel mentioned the upcoming health spending because society is aging and living longer, which requires more resources. The other issue is pension spending, associated with demographic change and improving the living standards of the elderly.
This fortunate intention of increasing the Universal Pension for the elderly will also have a significant cost as the Mexican population ages,” said Esquivel from the San Lázaro legislative library.
Alexandra Haas, executive director of Oxfam Mexico, mentioned in the panel that “today, the Mexican government has less room for maneuver to respond to crises due to its growing obligations and the few public resources available.”
Data from the organization shows that for every 100 pesos produced by the Mexican economy, the government only collects 17.8 pesos from taxes, which is below the Latin American average. Haas Paciuc mentioned that most of the taxes collected in Mexico come from taxes on consumption, personal income, social security and payroll.
“Taxpayers with income of 500 million pesos per year barely represented 0.03% of the total tax collection in our country. In addition, large companies paid, in 2021, effective Income Tax rates of 1 to 8% of their total income, it is supposed to be 30%”, said Alexandra Haas.
Gerardo Esquivel argued that the Mexican tax system favors income via capital and not via work. “The labor tax is high and capital income, such as dividends, profits, improvement in asset prices, are not taxed and it is not always applied because it is difficult and confusing.”
You have to understand a complex subject
However, the former member of Banxico qualified that the world is advancing and that developed economies have taxes on inheritances and patrimony (or wealth).
“First we have to discuss it and understand it. When it comes to inheritance taxes, many people oppose it because they think it will affect anyone, but no. We are talking about multi-million dollar estate taxes,” he mentioned.
A federal tax on large fortunes could raise up to 270,000 million pesos a year. This is enough to increase spending on public health by almost 40% or multiply spending on environmental protection by 17, according to Oxfam.
“No one has said that it is easy, if it were so, the reform would have already been carried out. (The implementation) is profoundly complex and difficult, but the alternative is worse. The alternative is to do nothing and maintain (state) capture and poverty,” Haas said.
