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| President of Mexico Proposes Tax Overhaul | President of Mexico Proposes Tax Overhaul |
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| MEXICO CITY — Pressing ahead with plans to reshape Mexico’s economy, President Enrique Peña Nieto proposed on Sunday a sweeping overhaul of his country’s tax system, intended to collect billions of dollars to finance new social programs. | MEXICO CITY — Pressing ahead with plans to reshape Mexico’s economy, President Enrique Peña Nieto proposed on Sunday a sweeping overhaul of his country’s tax system, intended to collect billions of dollars to finance new social programs. |
| In a speech from his residence, Mr. Peña Nieto described the broad outlines of his plan, which would eliminate many loopholes and exemptions that favor the richest Mexicans. He proposed new taxes on capital gains, carbon emissions and soft drinks, and increased income taxes for those making over about $39,000 a year. | In a speech from his residence, Mr. Peña Nieto described the broad outlines of his plan, which would eliminate many loopholes and exemptions that favor the richest Mexicans. He proposed new taxes on capital gains, carbon emissions and soft drinks, and increased income taxes for those making over about $39,000 a year. |
| Still, he said, his proposal was “good news for Mexican families,” because the revenue it would generate would pay for a new universal pension for all Mexicans over 65, a new unemployment insurance scheme and more spending for schools and infrastructure. | Still, he said, his proposal was “good news for Mexican families,” because the revenue it would generate would pay for a new universal pension for all Mexicans over 65, a new unemployment insurance scheme and more spending for schools and infrastructure. |
| The Mexican government currently collects just 10.6 percent of the country’s annual economic output in taxes, less than almost any other country at its level of development. With so little tax revenue, the government has financed itself instead by squeezing money from Pemex, the state-owned oil monopoly, to pay for 30 to 40 percent of its spending. Mr. Peña Nieto is pushing to open up the energy industry and reduce the country’s dependence on revenue from Pemex. | The Mexican government currently collects just 10.6 percent of the country’s annual economic output in taxes, less than almost any other country at its level of development. With so little tax revenue, the government has financed itself instead by squeezing money from Pemex, the state-owned oil monopoly, to pay for 30 to 40 percent of its spending. Mr. Peña Nieto is pushing to open up the energy industry and reduce the country’s dependence on revenue from Pemex. |
| “We collect few taxes because we have oil,” said Juan E. Pardinas, the general director of the Mexican Institute for Competitiveness, a research institute here. “That allows us to pay less in taxes and allows the state to make little effort to collect them.” | “We collect few taxes because we have oil,” said Juan E. Pardinas, the general director of the Mexican Institute for Competitiveness, a research institute here. “That allows us to pay less in taxes and allows the state to make little effort to collect them.” |
| Mr. Peña Nieto is in a hurry. Since taking office in December, he has been able to work with the two main opposition parties to rewrite Mexico’s public education laws and promote competition in the telecommunications industry. | Mr. Peña Nieto is in a hurry. Since taking office in December, he has been able to work with the two main opposition parties to rewrite Mexico’s public education laws and promote competition in the telecommunications industry. |
| Under an agreement between his party and the opposition known as the Pact for Mexico, he is trying to swiftly inject some dynamism into an economy that has failed to grow any faster than 2 percent a year, on average, since 2001. | Under an agreement between his party and the opposition known as the Pact for Mexico, he is trying to swiftly inject some dynamism into an economy that has failed to grow any faster than 2 percent a year, on average, since 2001. |
| “In the next months, we will be deciding what history we are going to write for the next decades,” Mr. Peña Nieto said last week in the annual presidential address on the state of the nation. “We have 120 days for 2013 to be remembered as a year of great transformations.” | “In the next months, we will be deciding what history we are going to write for the next decades,” Mr. Peña Nieto said last week in the annual presidential address on the state of the nation. “We have 120 days for 2013 to be remembered as a year of great transformations.” |
| The Pact for Mexico has worked where there was broad agreement, but the political divisions over energy policy and taxes are deep. When it comes to taxes, nobody seems to want to take the lead. | The Pact for Mexico has worked where there was broad agreement, but the political divisions over energy policy and taxes are deep. When it comes to taxes, nobody seems to want to take the lead. |
| “The government is 100 percent in charge of this,” Gustavo Madero, the president of the conservative National Action Party, said in an interview before Mr. Peña Nieto unveiled his tax proposal. “Let the government defend it.” | |
| Even so, Mr. Madero was present, along with other opposition leaders, when Mr. Peña Nieto presented his tax proposals on Sunday. Majorities in both houses of Congress must approve the proposals for them to become law. | Even so, Mr. Madero was present, along with other opposition leaders, when Mr. Peña Nieto presented his tax proposals on Sunday. Majorities in both houses of Congress must approve the proposals for them to become law. |
| The overhaul also includes a plan to allow Pemex to keep and reinvest more of its profits, but the government must replace that revenue, which adds to the need for new taxes. Even if the country’s political elite agrees to lighten Pemex’s burden and step up tax collection, popular opinion may not follow. | |
| Andrés Manuel López Obrador, the left-wing candidate who ran second to Mr. Peña Nieto in last year’s presidential election, drew an estimated 30,000 people to a rally on Sunday and promised to organize further protests against the president’s energy and tax policies. | Andrés Manuel López Obrador, the left-wing candidate who ran second to Mr. Peña Nieto in last year’s presidential election, drew an estimated 30,000 people to a rally on Sunday and promised to organize further protests against the president’s energy and tax policies. |
| “The government wants to privatize oil,” said Nuria Lanzagorta, 33, a psychologist who attended the rally. | “The government wants to privatize oil,” said Nuria Lanzagorta, 33, a psychologist who attended the rally. |
| The country’s finance minister, Luis Videgaray, said Sunday that the existing tax system was not just inefficient, but that it was also inequitable. Tax collection and public spending have failed to improve the country’s steeply unequal distribution of income distribution, according to a study by the Organization for Economic Co-operation and Development. | The country’s finance minister, Luis Videgaray, said Sunday that the existing tax system was not just inefficient, but that it was also inequitable. Tax collection and public spending have failed to improve the country’s steeply unequal distribution of income distribution, according to a study by the Organization for Economic Co-operation and Development. |
| But analysts warn that collecting more taxes will not solve Mexico’s problems unless the government changes the way it spends them. | But analysts warn that collecting more taxes will not solve Mexico’s problems unless the government changes the way it spends them. |
| “Before a new wave of taxes,” Mr. Pardinas of the Institute for Competitiveness said, “there should be a re-engineering of public spending. We know there are obscenities in public spending.” |