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PRESIDENT FELIPE CALDERON SUBMITS LIMITED BUDGET TO CONGRESS, BUT TAX REFORM EXPECTED TO BOOST TOTAL EXPENDITURES.

Article Excerpt
The tax-reform proposal approved by Congress in mid-September is expected to increase government expenditures on infrastructure, health, and education, which could translate into a higher growth rate than President Felipe Calderon anticipated in the budget proposal he sent to Congress in early September. The Chamber of Deputies and the Senate approved the changes to the tax code a little more than a week after the Secretaria de Hacienda y Credito Publico (SHCP) sent its budget plan to legislators. The tax plan is expected to boost government revenues by about 115 billion pesos (US$10.5 billion) in 2008, the first year in which the changes would be in effect (see SourceMex, 2007-09-19).

By law, the Congress must approve the budget, in two separate steps, by a Nov. 15 deadline. The first step involves the income portion of the budget (Ley de Ingresos), and the second step deals with expenditures (Presupuesto de Egresos). In both cases, legislators will be working with proposals presented by the Calderon administration.

The proposal the administration submitted to Congress did not incorporate the tax changes. But even without tax reform, the administration was projecting income from the value-added tax (Impuesto al Valor Agregado, IVA), the income tax (Impuesto Sobre la Renta, ISR), and other taxes to increase by 8% in 2008.

Additionally, the proposed budget contained higher expenditures than the Calderon government originally envisioned. The administration proposed expenditures of 2.39 trillion pesos (US$218 billion). Just days before the budget was...

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