Mexico, June 30, 2007
Posted by Charles II on June 30, 2007
There are civil rights protests going on in the United States, which you can read about in Mexico. They have lots of pictures for people who don’t read Spanish. Here’s one:
If only Al Gore had done this: Lopez Obrador, successful presidential candidate/unsuccessful presidential appointee of the PRD in Mexico has written a book, “The Mafia Stole the Presidency From Us.” Looking at poll documents showing evidence of fraud, that’s not hard to believe.
Among the things mentioned are that someone (presumably the ruling PAN party) told Televisa that AMLO planned to expropriate them. Also, that Dr. Ana Cristina Covarrubias did an exit poll of 38,617 voters that predicted a three-point win (via SdP)
In Oaxaca César Mateos was freed from jail, which the APPO regards as a victory.
A modest proposal in the Swiftian sense
Mexico economy: A modest tax reform
…
FROM THE ECONOMIST INTELLIGENCE [sic] UNIT
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Mexico’s government presented its long-awaited fiscal reform proposal to Congress on June 20th….the corporate sector will bear the brunt of the costs. Once approved, the reforms will lift Mexico’s dismal non-oil tax collection rate of around 10% of GDP—the second lowest in Latin America—by less than three percentage points by the end of Mr Calderón’s term in office in 2012.
One of the main features of the package is a 19% flat tax on business income (sales less input costs), which, by eliminating deductions, would increase tax collection from the corporate sector. …The existing 2% corporate assets tax would be eliminated.
…
Going after informal businesses
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The finance ministry, which presented the plan, is also proposing a “tax against informality” in the form of a 2% levy on monthly bank cash deposits in excess of Ps20,000 (US$1,860). This is designed to bring into the formal economy and the tax system small businesses currently operating without legal status and paying no taxes at all. The 2% would be credited against corporate income tax. The plan also includes a 20% tax on the proceeds from gaming operations and, rather strangely, a 50% tax on aerosol paints….
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Not included in the package is any change to the maximum income tax rate of 28%, or to the rate and application of the 15% value-added tax….
Ok, let’s take as a SWAG (scientific WA guess) that they should be collecting 30% of GDP as taxes. This is a low level relative to industrialized nations, especially since Mexico provides health insurance of a kind, but somewhere around the level collected by Third World nations like the United States. But they’re only collecting 10% of the taxes they should be collecting because corruption is rampant (and oil revenue is likely to start collapsing).
So who do they go after? Anyone with a bank account of $1,800. Which means the middle class of Mexico.
What Mexico needs to do is clean up corruption. Then, small business will come out of the shadows, and big business–which is responsible for a lot of the corruption– will be honest.
And pigs will fly.
10 Responses to “Mexico, June 30, 2007”
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Phoenix Woman said
There are too many people benefitting from the corruption, of course.
Charles said
Give the lady a box of Tiparillos.
And the United States is even more corrupt, but it’s done in a more orderly, refined and elegant manner.
Phoenix Woman said
Indeed:
The decline of undercover reporting — and of investigative reporting in general — also reflects, in part, the increasing conservatism and cautiousness of the media, especially the smug, high-end Washington press corps. As reporters have grown more socially prominent during the last several decades, they’ve become part of the very power structure that they’re supposed to be tracking and scrutinizing.
Chuck Lewis, a former “60 Minutes” producer and founder of the Center for Public Integrity, once told me: “The values of the news media are the same as those of the elite, and they badly want to be viewed by the elites as acceptable.”
Charles said
Yeah, Howie Kurtz’s criticism of Silverstein was a particularly illustrative example of the corruption.
Silverstein told some white lies to find out and report what happens in the world of lobbying, which he is able to publish in a magazine that reaches maybe 50,000 people.
Mrs. Howard Kurtz tells black lies from within the world of lobbying.
Mr. Howard Kurtz has the media criticism position in a paper that reaches directly maybe 5 million people and, indirectly, many more, from which lofty pulpit he attacks Ken Silverstein for exposing the corruption of people like Mrs. Kurtz.
Howie Kurtz is such a perfect example of a walking conflict of interest, it’s amazing he hasn’t suffered catastrophic engineering failure.
chenka said
Hey, I currently pay 2% of my gross business income in Federal tax. This is my legal obligation as a small business owner (private individual, not a SA de CV) here in Mexico. This level of taxation and only a 10% collection rate? Yow…
Charles said
First, Chenka, I think the level of collection is more like 30%. That is, they should be collecting 30% of GDP in taxes, but collect only one-third of that.
But, second, I’m not sure what your point is. The consequences of these tax shifts would be very different for, say, a company that produces tortillas versus one that sells furniture.
I don’t understand how this tax would impact your business. The article states that current taxes are 2% of assets/28% of net income less deductions, switching to a 19% tax on net income (but no deductions) as an alternative minimum tax. The businesses it will really hit are not ones that are paying taxes, like yours, but businesses that are ::cough:: operating in the informal sector.
chenka said
Hey Charles, Yeah, I understood the article. My point, observation really, was that if a 2% tax rate (this is an individual rate too, not just the existing 2% corporate assets tax — you can opt to be taxed at this rate if you earn less than 2M pesos a year) isn’t encouraging more folks to pay taxes — “Yow”.
Charles said
According to The Economist, the old tax is a 2% assets tax PLUS a 28% income less deductions tax, Chenka. The new tax is 19% of net income, no deductions, no assets tax.
They both should collect roughly the same amount of money. The virtue of the flat tax is simplification, which not only eases tax preparation for honest taxpayers, it helps to prosecute tax cheats. This much isn’t really toxic if it were enforced. It won’t be, and “expenses” will come to include the CEO’s mansion, limo, vacation, and girlfriend.
But a 2% tax on bank deposits would be very bad for the middle class.
chenka said
I suspect we’re comparing apples to oranges as the article is discussing the new proposed single-rate tax for corporations while I’m talking about the existing single rate tax for individuals. On a federal level, individuals operating a small business pay 2% on gross income with no deductions and no assets tax.
Charles said
Ok, now I understand what you’re saying, Chenka. That’s a wrinkle not discussed by Deloitte. Interesting.