The most important lesson Mexico can take from Colombia is the importance of a willingnes to pay. According to Professor Samuel Gonzalez Ruiz of UNAM and the 2010 Index of Economic Freedom, Mexico generates less than 9% of GDP in tax revenue. Only one country in Latin America does a poorer job: Haiti. Upon entering office in 2002 Colombian President Alvaro Uribe raised taxes to improve and expand the military and national police forces. The funding also paid for social programs like Familias en Acción, which paid for poor children in rural areas to attend school and get basic nutrition. Without a willingness to pay for better state institutions, any reform plan will fail regardless of its strategic orientation. There can be no more relying on the state oil company PEMEX to generate 40% of government revenues. Those profits should be distributed to taxpayers and taxed back by the government to increase transparency, accountability and swell the ranks of official taxpayers.That 9 percent is lower than what you see from other sources (such as the OECD), but Mexico without a doubt needs to collect more cash. Like most of the ways in which Colombia offers lessons for Mexico, this is a goal whose realization would help Mexico regardless of its security situation and Colombia's resemblance to it. This is good advice because a broad, sustainable tax base is objectively better than a narrow, declining tax base, regardless of what your spending needs are.
Thursday, December 2, 2010
Colombia's Lessons for Mexico: A Nuanced Take
Courtesy of Nathan Jones: