Mexico is Lowest in Taxes of OECD Member Countries Patrick Ferguson - The News
go to original October 29, 2012

MEXICO CITY – Mexico’s tax revenue as a percentage of gross domestic product in 2011 was the lowest among Organization for Economic Development (OECD) member countries, the second year in a row.

Tax revenues accounted for 19.7 percent of Mexico’s GDP last year, about 14 percentage points below the OECD average of 34 percent, the organization said in a statement last week. In 2010, Mexican tax revenues were 18.8 percent of GDP.

Although Mexico has increased its tax revenues by 2 percentage points since 2007, the country has scored well below the OECD average for the last decade. Overall, revenue across the OECD rose by 0.2 percentage points from 33.8 percent in 2010.

President-elect Enrique Peña Nieto, who takes office on Dec. 1, has vowed to reform the country’s laws to simplify the tax system and increase government transparency and revenue.

“This increase in 2011 tax revenues supports fiscal consolidation efforts in many countries,” OECD Secretary General Angel Gurría said in the statement. “However, if OECD countries want to pursue these long-term strategies successfully, the increase in tax revenue must go hand in hand with efforts to restore long-term growth prospects, strengthen economic activity and create jobs.”

In a meeting with the OECD last week in Paris, Peña Nieto said, “My commitment is to work under these two principles: responsible management of public finances and respect for the definitions of the Central Bank, with which we will maintain macroeconomic stability, and it will remain the ideal platform to encourage other actions that allow Mexico to grow economically.”

Last week, Mexican federal deputies discussed the reform even though no specific proposals have been put forward so far.

PRI Deputy Jesús Murillo Karam said, “It certainly looks good to me, but we have to know what the bill says.”

Peña Nieto has also promised to reform the country’s energy sector and open Pemex, Mexico’s state-owned oil company, to private investment. Pemex accounts for about 40 percent of total revenue.

Mexico’s low tax revenue is the result of large informal economy, which employs about 14 million people, and weak enforcement of existing laws, stated the OECD in a report published last year.

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