Mexico Institutional Revolutionary Party Aims to End Company Tax Loopholes

The largest party in Mexico’s lower house aims to eliminate loopholes that allow businesses to claim tax exemptions that lawmakers say are equivalent to 4 percent of gross domestic product, congressman Sebastian Lerdo said.

The Institutional Revolutionary Party, or PRI, favors approving a 2011 budget that includes measures to end the exemptions, Lerdo said in an Aug. 18 interview. The party will block budget legislation if other parties oppose the measure, he said.

“The bill would force the Finance Ministry to send us reports on the economic and social benefits of the special tax treatment so Congress can decide which ones it will keep and which ones it will eliminate,” Lerdo said.

Mexico’s government would have taken in 465 billion pesos ($36.4 billion) more in tax revenue in 2009 had the exemptions not existed, and will miss out on 580 billion pesos in revenue this year and 589 billion pesos next year, which is equal to more than 4 percent of GDP, according to a report by Lerdo.

The PRI proposed a bill to eliminate tax loopholes in February. While it was approved by the lower house budget committee, it still needs to be approved by the finance committee in order to go to a full floor vote.

The government raised the value-added tax by 1 percentage point this year to boost public revenue that had been undercut by declining oil production and a fall in income tax revenue amid last year’s recession. Output at state-owned Petroleos Mexicanos, Latin America’s largest oil producer, fell 7 percent in 2009 from the prior year.

Mexico’s government must submit to congress by Sept. 8 its proposal for the 2011 budget. The income portion of the budget must be approved by Oct. 15.

To contact the reporter on this story: Adriana Lopez Caraveo in Mexico City, at adrianalopez@bloomberg.net; Jens Erik Gould in Mexico City at jgould9@bloomberg.net

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