Taxes and the rich in Mexico

Oxfam, the conglomerate of organizations in favor of social equality, publishes its report for Mexico, with the name Who pays the bill? The myths behind the great fortunes in Mexico. Oxfam’s laudable objective is to provoke a discussion around the need to improve taxation in developing countries. Controversy has already been generated. It is said that the important thing is to generate wealth, not reduce inequality, when both things are fundamental and it will be impossible to increase investment in infrastructure without more resources for the public sector. Those who are against increasing taxes in Mexico always avoid explaining why the country collects less, in relation to GDP, compared to other economies, just 17.8% of the product for taxes, when the OECD average is 35 percent. . Oxfam focuses its analysis for Mexico on super millionaires and large companies. He points out that taxpayers with incomes of more than 500 million pesos a year barely represented 0.03% of the total collection, while for every 100 pesos that were generated between 2019 and 2021, 21 of them captured the richest 1%.

Oxfam proposes a federal wealth tax that could tax people with assets greater than 20 million pesos at 2% and those with assets over 100 million pesos at 3%, with a potential collection of 270 million pesos. I think that other alternatives can also be explored to tax this sector, such as including the calculation of all their income when accounting for income, increasing the marginal ISR rates, reducing the possibility of deductions at a certain level of income and taxing successions. . Now, it seems to me that the real revenue potential is found in a tax that already exists and that is collected very little, the predial.

It is necessary to work on a new design so that the three levels of government participate in the registration and collection of property, an activity that is increasingly easier to carry out thanks to technology, so that the country can obtain by this means an additional percentage point of the Collection GDP. That, in addition to taxing the possession of the car again, also with a progressive scheme. We know where the mansions (and cars) of the richest 1% are and what features they have, just now appraise them at market value and properly capture real estate capital gains.

The Oxfam document clearly shows the evolution of taxes in Mexico. In the 2007-2020 period, tax collection increased from 12 points of GDP to 17.8, due to new taxes, caps on deductions and better control. That means that in three six-year terms we are going to achieve an increase of six points. Due to the increase in the cost of pensions, the payment of interest and the need for greater investment and public services, the new administration will need to maintain this rhythm and, at least, seek two additional points of income. Consumption taxes, such as VAT and special taxes, are the ones that have contributed the most to additional collection, around 2.15% of GDP in 13 years.

It is possible that more resources can be obtained in this way, thanks to technology and the reduction in the use of cash that can help to better control them, but increase their rates, or eliminate the deductibility of food and beverages in the case of VAT, it would have significant regressive effects and would contribute little to public finances. Income and wealth taxes are the ones that have grown the least in recent years, and because they are progressive, they should be used more intensively in the coming years. This implies thinking outside the box. In Spain, for example, a tax was established on sectors with extraordinary profits in the current situation, such as finance, due to the increase in rates, or energy, due to the increase in prices. of hydrocarbons.

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