Mexico to evaluate need for tax reform after midterm elections

Mexico will this year evaluate the need for a tax reform, Finance Minister Arturo Herrera told Reuters on Thursday, saying the federal government was talking to states about their fiscal requirements to see if conditions exist for such a shake-up.

President Andres Manuel Lopez Obrador campaigned on a promise of no tax hikes or new taxes in the first three years of his government, a period which ends in December.

Herrera said the issue would be taken up after midterm elections in June. Mexico’s tax revenue as a percentage of gross domestic product (GDP) is the lowest in the 37-nation Organisation for Economic Co-operation and Development (OECD).

“We are already entering an electoral process that will be highly competitive … and that will probably prevent us from having an open discussion about this process in the coming months”, Herrera said, adding that some discussions were underway already with state governments.

“Right after the elections we will have to assess together, all of us, what the context is and if the conditions allow us to propose any changes to the country’s tax structure.”

Herrera added that the government is upwardly revising its 2021 growth forecast to 5.0%-5.5%, saying the United States’ $1.9 trillion stimulus package was very important for its southern neighbor’s closely-linked economy.

As of January, the Mexican finance ministry was forecasting GDP growth of 4.6% this year. Earlier this month, the central bank revised up its main 2021 growth forecast to 4.8%.

Mexico’s economy suffered its biggest slump since the 1930s last year, shrinking by 8.5% in seasonally-adjusted terms.




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