Mexico - Country Economic Memorandum : Challenges and Prospects for Tax Reform
Over the last ten years, the need for sustainable tax revenues has become clear, in order to provide more public expenditures in areas such as, poverty alleviation, health, education, and infrastructure, as well as for payment of the recent social...
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| Language: | English en_US |
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Washington, DC
2013
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| Online Access: | http://documents.worldbank.org/curated/en/2002/07/1979346/mexico-country-economic-memorandum-challenges-prospects-tax-reform http://hdl.handle.net/10986/15377 |
| Summary: | Over the last ten years, the need for
sustainable tax revenues has become clear, in order to
provide more public expenditures in areas such as, poverty
alleviation, health, education, and infrastructure, as well
as for payment of the recent social security reform, and
banking sector support. The report examines the key problems
in Mexico's tax, and revenue system, identifying
administration as the weakest factor in its tax system,
where such weakness has contributed to political resistance
in broadening the tax base. In addition, the system relies
heavily on oil revenues, only about thirty percent of the
total, and dependent on world prices, thus, the rest of the
economy will have to bear a larger tax burden as a share of
GDP. Meanwhile, various exemptions, and special regimes
erode the base of the most important taxes - Value Added Tax
(VAT), corporate, and personal income taxes, and, most tax
decisions, and the derived political consequences, continue
at the national level, while the delivery of services is
increasingly devolved to sub-national levels. Within the
reform options, the most relevant fall in three areas:
national tax policy, administration, and inter-governmental
fiscal relations, where the central theme is to improve
revenue capacity, efficiency, and horizontal equity of the
system, by simplifying laws, eliminating exemptions, and
facilitating compliance, and enforcement. Such reform
strategy will be successful if implemented in a coordinated
way, by reducing evasion, and improving collection; by the
already implemented income tax reform (end of 2001),
although the VAT and petroleum taxation remain on the agenda
for future action; and, by the State cooperation in the tax
reform program, to improve enforcement, particularly the VAT. |
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