Pena Nieto’s PRI Said to Propose Watered Down Mexico Tax Bill

Lawmakers from Mexican President Enrique Pena Nieto’s party are seeking to remove from his tax bill new levies that the opposition calls an attack on middle-income families, two people with knowledge of the changes said.

Lower house legislators want to scrap value-added taxes Pena Nieto proposed for private education tuition, home rentals and mortgage interest, among other changes, the two people said. The lawmakers are seeking approval from the government to implement the changes during debates in Congress, according to one of the people. A draft of the proposal obtained by Bloomberg shows they back measures to raise the sales tax in areas that border the U.S. to 16 percent from 11 percent.

Pena Nieto’s proposal, presented Sept. 8, seeks to spur investment by shifting taxes away from the state-controlled energy sector and toward other revenue sources as part of his efforts to boost economic growth above 5 percent. The bill would increase tax revenue by 1.4 percentage points of gross domestic product in 2014 by lifting sales-tax exemptions in place for many other items while also proposing a higher maximum income tax and a new capital gains tax.

The president’s office didn’t immediately respond to a request for comment about changes proposed by members of his Institutional Revolutionary Party, or PRI.

The opposition National Action Party, or PAN, whose votes Pena Nieto needs to pass a bill to open the state-controlled energy industry to more private investment, has said the tax overhaul disproportionately targets middle-income families.

The PAN has said the tuition tax proposal and tax on mortgage interest should be dropped. If those taxes remain, along with the higher border tax, the PAN would vote against the bill, Jose Isabel Trejo, a member of the party who heads the lower house Finance Committee, said in an interview yesterday.

The border cities now charge a lower tax rate to better compete with the U.S.

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