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Article Excerpt
President Felipe Calderon's 2010 budget proposal avoided the contentious value-added tax (impuesto al valor agregado, IVA) on food and medicines, but the president stirred up a hornet's nest by proposing a different tax, which would be levied on consumption of almost all goods and services. Although the proposed tax would increase funds for social programs, critics charged that the levy would hurt the poor disproportionately, in what amounts to "taxing the poor to help the poor." Others were just as adamant about the tax's negative impact on the middle class. Even the business sector, which recently came out in support of a modest IVA on food and medicines, criticized Calderon's tax plan as counterproductive, particularly because the president also proposed several other tax increases.
Tax intended to raise funds for anti-poverty programs
The president's revenues budget (Presupuesto de Ingresos), which Finance Secretary Agustin Carstens presented to Congress in early September, contained the controversial tax, denominated the Contribution to Combat Poverty (Contribucion para el Combate a la Pobreza), which would levy a 2% consumption tax on the entire production chain.
Carstens estimated that the tax would increase revenues by about 70 billion pesos (US$5.3 billion), money that would fund programs that help the 14 million people who live in poverty in Mexico. Administration officials envision an increase of 50% in funding for Oportunidades and other public-assistance programs. "Mexican families are the priority of the administration," said Social Development Secretary Ernesto Cordero Arroyo.
The tax faces an uphill battle in Congress, which must approve the revenues budget before considering the expenditures budget (Presupuesto de Egresos).
Some members of the opposition parties have soundly criticized the proposed 2% levy as an "IVA in disguise" and a new tax on the poor. "This tax isn't going to pass because it's a...
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