Mexico tax reform plan clears hurdle, now needs Senate approval

Dave Graham and Miguel Gutierrez
Tuesday, 29 Oct 2013 | 10:06 AM ET

MEXICO CITY, Oct 29 (Reuters) - Two Mexican Senate committees approved a package of measures on Tuesday aimed at boosting Mexico's weak tax take, sending the fiscal bill unchanged to the Senate floor for a full vote later in the day.

A key plank of President Enrique Pena Nieto's reforms, the bill was approved by lower house lawmakers earlier this month after they revised it to cut plans to apply sales tax to rents, mortgages, property sales and school fees.

The lower house also raised the top income tax rate to 35 percent from 30 percent and added a 5 percent levy on junk food at the last minute.

Though the Senate bodies, which included the finance committee, made no changes to the bill, it will carry a number of reservations that could lead to modifications on the floor.

Any changes would mean sending it back to the lower house to be approved again, and Congress is due to approve the bill by the end of this month.

Opposition conservatives have fought against much of the bill and are pushing hard to strip out a measure to raise the value-added tax (VAT) rate for border states to 16 percent.

At present, the states bordering the United States enjoy a lower VAT rate of 11 percent to encourage business.

The lower house changes to the tax plan in mid-October created a shortfall in the budget plan for next year, prompting lawmakers to raise the government's oil revenue estimate and make other alterations to close the funding gap.

The tax bill is tied to the 2014 budget, which must be approved by mid-November. It is one of the cornerstones of a reform drive spanning energy to telecommunications that Pena Nieto hopes will boost growth in Latin America's No.2 economy.

The last major reform pending in Congress is the president's planned overhaul of the state-controlled energy sector, which the government hopes will attract investment, help stem a slide in oil output, and power economic growth.

Pena Nieto proposed an energy revamp in August that would loosen the grip on the sector of state oil monopoly Pemex and offer private companies profit-sharing contracts.

If approved as presented, this would mark the largest opening of the energy sector to the private sector in decades.

However, the reform has stopped short of offering production-sharing contracts or concessions that oil majors had been hoping for, and many viewed it as cautious. Some lawmakers believe the plan could still be amended to attract more investment.