MEXICO CITY (Reuters) - Mexico's government proposed a tax reform bill on Sunday that would boost government revenue by about 240 billion pesos ($18 billion), or 1.4 percent of gross domestic product, in 2014 to fund more spending to help lift economic growth.
The planned reforms should generate additional annual revenue equal to 2.9 percent of GDP by 2018.
Below are key aspects of the tax proposal:
* Steeper income tax rates for higher earners would be introduced. Current maximum rate of 30 percent would be raised to 32 percent for those who earn more than 500,000 pesos ($37,800) a year. Deductions would be limited. Income tax reforms are expected to generate 59 billion pesos in additional revenue.
* The bill does not plan to extend the country's 16 percent value-added tax (VAT) to food and medicine. Many had expected processed foods to be taxed, with basic foodstuffs left untouched.
* A lower 11 percent VAT rate for states bordering the United States would be raised to match the national rate. Companies have been able to arbitrage the difference between the rates by falsely claiming they buy inputs at the higher rates and sell at the lower rates when the opposite is the case. Other exemptions, such as private school fees and VAT refunds from mortgage interest payments will be eliminated. VAT changes are expected to generate 54 billion pesos in revenue.
* A crippling tax burden on state oil monopoly Pemex (PEMX.UL) will be replaced with a regime of royalty payments, dividends and income tax requirements similar to that a private company would face.
* A 10 percent tax on stock market gains and dividends.
* New excise taxes would be applied to fuels, pesticides and sugary drinks. The taxes would raise about 34 billion pesos next year. Gasoline subsidies would keep being cut through next year, freeing up another 62 billion pesos.
* Eliminate a regime that allows corporate income tax deferrals as well as simplifying the current income tax law to reduce deductions.
* An alternative minimum tax, known as the IETU, that was introduced in 2008, would be scrapped, reducing the costs for companies to comply with tax responsibilities. ($1 = 13.2405 Mexican pesos)
(Reporting by Mexico City newsroom; Editing by Maureen Bavdek and Christopher Wilson)
- Politics & Government