Mexico's lower house of Congress OKs revised tax plan

Reuters

By Miguel Gutierrez and Luis Rojas

MEXICO CITY, Oct 17 (Reuters) - Mexico's lower house ofCongress gave general approval on Thursday to a revisedgovernment tax plan that aims to boost receipts by nearly 3percent of GDP by 2018.

Presented last month, President Enrique Pena Nieto's plan tostrengthen Mexico's weak tax receipts ran into opposition frombusiness groups and conservatives in Congress, promptinglawmakers in the lower house to propose stripping divisive itemsfrom the bill.

The bill was revised on Wednesday to raise the top incometax rate on a sliding scale to 35 percent from 30 percent,impose a 5 percent tax on junk food and roll back plans to applysales tax to rents, mortgages, property sales and school fees.

It must still be passed by the Senate, which is expected toapprove the reform by the start of November. It is tied to the2014 budget, which must be signed off on by mid-November.

Finance Minister Luis Videgaray said earlier on Thursday therevisions would leave the government with a revenue shortfall of55.7 billion pesos ($4.4 billion), which the government isexpected to seek to plug by raising its oil revenue forecast.

Mexico relies on revenues from state oil monopoly Pemex togenerate about a third of federal tax receipts, and the 2014budget had projected an average oil price of $81 per barrel.

Lawmakers in the ruling Institutional Revolutionary Party,or PRI, have said Congress could ratchet up the estimate fornext year to $86 a barrel, the benchmark for this year.

Videgaray said the cuts to the tax reform meant it wouldonly improve Mexico's tax take by about 1 percentage point ofGDP in 2014, 0.4 of a point less than originally planned.

But it would still yield an additional 2.8 percent of GDP bythe time Pena Nieto leaves office in 2018, the minister added.

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