Reuters: US Dollar Report: UPDATE 1-Mexico lawmakers to propose 35 pct top income tax rate -draft

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UPDATE 1-Mexico lawmakers to propose 35 pct top income tax rate -draft Oct 17th 2013, 02:14 Share this Email Print Reprints Wed Oct 16, 2013 10:14pm EDT By Alexandra Alper and Miguel Gutierrez MEXICO CITY Oct 16 (Reuters) - Mexican lawmakers will propose changes on Wednesday to a tax overhaul plan that President Enrique Pena Nieto hopes will boost the country's low tax receipts, and urge higher rates for top earners than previously planned, according to a draft obtained by Reuters. Pena Nieto last month proposed a series of measures to raise Mexico's anemic tax revenues by about $35 billion by 2018, but is grappling with stiff political opposition and lobbying from business groups. He floated the idea of raising income taxes for wealthier Mexicans and slapping a levy on stock market gains, a universal pension and unemployment insurance, along with emergency spending that would force a budget deficit this year and next. The fiscal reform proposal is a key plank of a wider reform agenda that Pena Nieto hopes will boost growth in Latin America's No.2 economy, and also includes measures to tax soft drinks and impose a carbon charge on polluters. For their part, Lower House lawmakers will propose raising the proposed top rate on a sliding scale to 35 percent for those who earn more than 3 million pesos ($233,100) a year, above the 32 percent top rate that Pena Nieto had put forward, according to the draft reform revision. The lawmakers will also propose keeping a government plan to raise sales taxes in border states, the draft showed. Ruling Institutional Revolutionary Party (PRI) officials have previously said the government was willing to pull back proposed unpopular levies on private schooling and mortgages. The Lower House must approve the bill by Sunday. It must then pass through the Senate. Pena Nieto attached the reform to the 2014 budget, which must be approved by mid-November, and the PRI needs to cut a deal to pass the bill because it does not have a majority in Congress. Many economists and investors were disappointed that Pena Nieto did not seek a more comprehensive tax overhaul, and they warned that rising social security and pension costs would require further tax reform in the coming years. He steered away from imposing a controversial sales tax on food and medicine as Mexico's economy slows and as he saves capital to push through a key overhaul of the energy sector. "The government defiantly faces challenges in the medium term," said Marco Oviedo, an economist at Barclay's Capital in Mexico City. "The topic of public finances will remain pending, and they will have to address it later in Pena Nieto's term, or in the next administration." If the efforts to push the fiscal reform plan through founder, it will curb the government's spending plans and could complicate other legislation, including a bill to open the country's state-run oil industry to private investment. Link this Share this Digg this Email Reprints

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