Mexican Senate debates final details of tax overhaul

Reuters

By Dave Graham and Miguel Gutierrez

MEXICO CITY, Oct 30 (Reuters) - Mexican senators onWednesday debated parts of a tax overhaul aimed at boostinggovernment revenues, and were not expected to significantlyweaken a cornerstone of President Enrique Pena Nieto's economicreform agenda.

The Senate approved the broad outline of the bill late onTuesday and embarked on a marathon debate through the night overparts that opposition lawmakers have sought to knock down orchange. The bill would have to return to the lower house ofCongress if they make changes.

The bill, which raises top income tax rates for the wealthy,slaps levies on sugary drinks and junk food as well as a chargeon stock market gains, seeks to raise tax revenue by nearly 3percent of economic output by 2018.

Pena Nieto is pushing through a series of reforms alsotaking in the telecoms and energy sectors that he hopes willhelp boost a growth rate that has lagged that of other emergingmarkets.

The lower house watered down Pena Nieto's bill earlier thismonth, throwing out some planned levies amid an economicslowdown. They also raised the top income tax rates to push moreof the burden onto the country's richer citizens.

Lawmakers were considering calls to raise a planned levy onjunk food from 5 percent to 8 percent. Junk food is defined asproducts that contain more than 275 calories per 100 grams,which would hit chocolate in the land that gave it its name.

An 8 percent tax on junk food would raise about 5.6 billionMexican pesos ($435 million) a year, lawmakers said, or lessthan 0.04 percent of GDP.

Opposition conservatives fought against much of the bill andhave been pushing hard to strip out a measure to raise thevalue-added tax (VAT) rate for states on the U.S. border to 16percent from a reduced rate of 11 percent they currently enjoy.

The changes made to the tax bill by the lower house inmid-October created a shortfall in the budget plan for nextyear.

That prompted lawmakers to raise the government's oilrevenue estimate and make other changes to close the fundinggap. These are due to be voted by the Senate on Wednesday.

The tax bill is tied to the 2014 budget, which must beapproved by mid-November.

The last major reform pending in Congress is the president'splanned overhaul of the state-controlled energy sector, whichthe government hopes will attract investment, help stem a slidein oil output, and power economic growth.

Pena Nieto proposed an energy revamp in August that wouldloosen the grip on the sector of state oil monopoly Pemex andoffer private companies profit-sharing contracts.

If approved as presented, this would mark the largestopening of the energy sector to the private sector in decades.

However, the reform has stopped short of offeringproduction-sharing contracts or concessions that oil majors hadbeen hoping for, and many viewed it as cautious.

Some lawmakers believe the energy plan could still beamended to attract more investment.

Rates

View Comments (0)