| | |  Business News | November 2009 
Mexico Lawmakers Adopt Tax Plan, Raise VAT, Income Tax
 Miguel Angel Gutierrez - Reuters
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November 02, 2009
Mexico City - Mexican lawmakers finalized a watered-down version of President Felipe Calderon's fiscal reform package to raise taxes to reduce Mexico's dependence on its waning oil industry on Sunday.
Both houses supported a measure to raise the value added tax rate, or VAT, to 16 percent from 15 percent and raise the top income tax rate to 30 percent from 28 percent.
The Congress and the Senate also passed a new 3 percent tax on telecommunications that would exclude Internet services.
The vote, after days of debate, marks a partial victory for Calderon, whose original plan would have broadened Mexico's tax base but was rejected in the lower house last week. It was still unclear if the rise in the VAT tax would be enough to stave off a threatened credit-rating downgrade.
Mexican government revenues have plunged this year because of a severe recession and a slump in oil production, which is down by about a quarter from 2004 levels and debt rating agencies have warned the country needs to boost non-oil income.
"We know that the basic work of the state could be at risk if we don't give the government the necessary resources," opposition Congressman Baltazar Hinojosa from the Institutional Revolutionary Party, or PRI, said.
Calderon's conservatives lack a majority in both houses of Congress and were unable to convince the opposition to back a 2 percent sales tax on all goods that would be designated for anti-poverty programs.
The bill, part of the revenue portion of the 2010 budget, would raise taxes on beer makers and some bank deposits. It sets next year's federal budget deficit at the equivalent of 0.75 percent of gross domestic product and set a budget forecast that estimates Mexican crude exports will sell for an average $59 per barrel in 2010.
Calderon originally asked for a 0.5 percent deficit and that the crude oil price be set at around $54.
The majority of changes made to the bill passed the Senate in the early morning hours on Sunday. Some minor modifications, including some exceptions on cigarette taxes, will be considered by the Senate in coming days and then sent to Calderon's desk for final approval.
(Editing by Jackie Frank)
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