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Mexico: Tax Haven

30 June 2010 No Comment

Talking about taxes is always a difficult issue. In fact hardly anyone likes to think about paying them. However, according to a KPMG study, Mexico is a country where the tax burden is relatively low compared with other Western countries. In a study of 10 developed countries, including France, Japan, Italy, Germany, United States, the United Kingdom, Australia, Canada, Holland and Mexico and the result is that Mexico is the country with the lowest load of taxes in terms of corporate taxes.

A lower tax rate compared to other countries results in a direct benefit to the country’s economy. It becomes a competitive advantage, since it encourages direct investment in the country, and this always translates directly into new job sources for Mexicans.

Mexico has the lowest Total Tax Rate (TTR) in all countries studied, with a score of 59.9. This means that Mexico’s tax rates are 40.1% lower than those in the U.S., which is the country with the highest rate of all countries studied, with a TTR of 100.

It is true that in Mexico there is a widespread complaint about the application of taxes, and on equality with which we split the payment thereof, but the reality is that Mexico has a tax scheme very accessible to its citizens and investors. In fact, Mexico is a tax haven. The study shows that taxes in Mexico are not as high as they might seem. Our revenue as a percentage of GDP amounts to 11% when the Latin American average is 18%, according to United Nation´s Economic Commission for Latin America and the Caribbean (CEPAL).

This clearly is advantageous. However, the cost of having such low levels of collection is that it reduces opportunities to allocate public resources to meet needs of different population groups and to strengthen social policies and human development. Moreover, in the case of Mexico, the government compensates for the low recovery with the proceeds from the revenues from the national oil company.

It is important to note that the Government of Mexico makes an effort not to raise tax rates to be at the level of other developed countries, much less emulate our northern neighbors. In fact, taxes are not a way in which the government exploits us or gives luxuries to public officials.

In fact, Mexico has the lowest government spending measured as a percentage of GDP of all Organization for Economic Co-operation and Development (OECD) country members. This comparison shows that Mexico has a low tax collection and is possible to run the required government structure and functions with that budget.

What would it be possible if instead of complaining about the high taxes and collection, we realize that we are fortunate to have to pay low rates? What would be possible if everyone of us cooperates with our taxes to support the government in developing our country´s needs?

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