A recent proposal to slap value-added tax on medicine and food staples, such as tortillas and bread, has been slated by the National Action Party (PAN) in Mexico, while its go-ahead was given to a tax hike on alcohol and tobacco. Value-added tax in Mexico sits at around 15% and is applied to the majority of goods, but those items considered essential for “well-being” are currently exempt.
Fiscal reform has been pushed by multilateral organisations for some time now, and the government is seeking alternative sources of revenue that would not mean relying on oil sales, which are fickle and unreliable. Mexican President-elect Vicente Fox claimed that in order to maintain government spending on combating poverty, improving health and education and on credit programmes for small firms, tax increases are essential. Critics have caused uproar, however, alleging that a move to levy VAT on staples is merely another tax on the poor.
A tax reform proposal is expected in Congress next April, but any move will need the support of the PAN and one of the other parties to be passed as an economic reform. And so far, PAN is only interested in “marginal reforms” to the current system.