Mexico lawmakers to seek higher top tax rate in gov't overhaul

Reuters

By Miguel Gutierrez and Alexandra Alper

MEXICO CITY, Oct 16 (Reuters) - Lawmakers in Mexico's LowerHouse will propose changes on Wednesday to a tax overhaul planthat President Enrique Pena Nieto hopes will boost the country'slow tax receipts, and urge higher rates for top earners thanpreviously planned, officials said.

Pena Nieto last month proposed a series of measures to raiseMexico's anemic tax revenues by about $35 billion by 2018, buthe is now grappling with stiff political opposition and lobbyingfrom business groups.

He floated the idea of raising income taxes for wealthierMexicans and slapping a levy on stock market gains, a universalpension and unemployment insurance, along with emergencyspending that would force a budget deficit this year and next.

The fiscal reform proposal is a key plank of a wider reformagenda that Pena Nieto hopes will boost growth in LatinAmerica's No.2 economy, and also includes measures to tax softdrinks and impose a carbon charge on polluters.

For their part, lawmakers will propose higher top rates ofincome tax for the wealthy on a sliding scale beyond the 32percent top rate that Pena Nieto had put forward, lawmakers andofficials told Reuters on condition of anonymity.

Ruling Institutional Revolutionary Party (PRI) officialshave previously said the government was willing to pull backproposed unpopular levies on private schooling and mortgages.

The Lower House must approve the bill by Sunday. It mustthen pass through the Senate.

Pena Nieto attached the reform to the 2014 budget, whichmust be approved by mid-November, and the PRI needs to cut adeal to pass the bill because it does not have a majority inCongress.

Many economists and investors were disappointed that PenaNieto did not seek a more comprehensive tax overhaul, and theywarned that rising social security and pension costs wouldrequire further tax reform in the coming years.

He steered away from imposing a controversial sales tax onfood and medicine as Mexico's economy slows and as he savescapital to push through a key overhaul of the energy sector.

"The government defiantly faces challenges in the mediumterm," said Marco Oviedo, an economist at Barclay's Capital inMexico City.

"The topic of public finances will remain pending, and theywill have to address it later in Pena Nieto's term, or in thenext administration."

If the efforts to push the fiscal reform plan throughfounder, it will curb the government's spending plans and couldcomplicate other legislation, including a bill to open thecountry's state-run oil industry to private investment.

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