Tuesday, October 27, 2009

Senate Tax Update

The Senate has approved to increases in taxes on beer, cigarettes, and gambling. The 16 percent VAT (which would be a 1 percent uptick) is still up in the air (although the powerful contingent of PRI governors, with the exception of Coahuila's Humberto Moreira, supports it), and the 3 percent telecom tax is out.

I'm not sure if this is still the case, but as of Sunday they were pegging the projected price of oil at 64 dollars, which is slightly higher than the proposed peg from the Chamber of Deputies, and would make up a great deal of the budget gap from the removed taxes. The fact that the budget's viability relies so heavily on a figure that is impossible to accurately predict is somewhat silly. (After all, when oil was flying off the shelves at $140 a barrel in the middle of 2008, few guessed that it would close the year at less than $40.) In all fairness, Mexico's legislators, who are influenced but as I understand it not bound by projections from the finance secretary, are being relatively responsible, in that they are not pegging public spending to a plainly impossible price of oil. Fixing a $140 projection for 2010 sure would fund a lot of neat new programs. Nonetheless, it seems like there must be a more organized way to deal with the uncertainty.

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