Introduction
Technically, and even by common sense, Mexico’s economy requires a fiscal reform to broaden the tax base due to serious issues brought about by populism. Despite these pressing needs, the political climate makes implementing necessary changes, such as tax modifications, challenging.
Current Economic Challenges
Mexico’s economy is barely growing, while assistentialist spending escalates without proper oversight. Infrastructure projects inherited from López Obrador need subsidies to survive, and the ongoing fiscal correction is timid, limiting productive spending.
Politically, governments have a narrow window to implement unpopular changes at the start of their terms when popularity margins allow for resistance against unpopular measures.
However, the electoral clientele is off-limits when it comes to any tax adjustments that could improve public finance viability.
Political Discourse and Fiscal Reform
A noteworthy discussion emerged between Morena’s leader in the Chamber of Deputies, Ricardo Monreal, and President Claudia Sheinbaum. Monreal stated in November of the previous year that Mexico would soon need a profound fiscal reform.
However, in the lexicon of a Latin American populist, fiscal reform ranks alongside other “insults” like private capital and energy sector reform. These were once opposition flags that have now become unthinkable government policies, despite their urgency.
Monreal ended up denying his earlier statements about the need for fiscal reform and pledged his legislative efforts to Sheinbaum’s desired electoral reform starting February.
Proposed Tax Changes and Their Feasibility
Some voices within the ruling party attempted to initiate tax changes using the familiar topic of progressive indirect taxes, without touching the crucial direct tax – the VAT.
The temptation of special taxes or taxing inheritances remains in leftist rhetoric, but eliminating consumption tax exemptions is the genuine fiscal reform. The impossible fiscal reform.
With the deadline for presenting the General Criteria of Economic Policy and Income and Expenditure Budget Laws approaching in less than two weeks, this is the opportunity to propose a reform or at least a Miscellaneous Fiscal Bill.
There’s room for enhancing taxpayer oversight, combating government corruption, and optimizing customs operations, especially with new tariffs on Asian products. However, tax changes might eventually become necessary.
Upcoming Fiscal Vision
In less than two weeks, we will learn about the federal government’s fiscal vision for 2026 through the General Criteria of Economic Policy. The proposed Miscellaneous Fiscal Bill’s scope will reveal the extent of potential fiscal discussions, putting an end to any speculation about a possible reform for the following year.
Morena’s leader in the Chamber of Deputies, Ricardo Monreal, stated in November of the previous year that Mexico would soon require a profound fiscal reform.
Key Questions and Answers
- What are the current economic challenges facing Mexico? Mexico’s economy is barely growing, with escalating assistentialist spending and inherited infrastructure projects requiring subsidies. The ongoing fiscal correction is timid, limiting productive spending.
- Why is implementing fiscal reforms difficult in Mexico’s political climate? The electoral clientele is off-limits for any tax adjustments, and governments have a narrow window to implement unpopular changes at the start of their terms.
- What kind of fiscal reform was proposed by Ricardo Monreal? Monreal initially called for a profound fiscal reform but later denied it, pledging his legislative efforts to Sheinbaum’s desired electoral reform.
- What are the feasible tax changes being considered? Eliminating consumption tax exemptions is seen as the genuine fiscal reform, while special taxes or taxing inheritances remain in leftist rhetoric but are considered unthinkable government policies.
- When will we learn about the federal government’s fiscal vision for 2026? The General Criteria of Economic Policy will be presented in less than two weeks, revealing the scope of potential fiscal discussions and putting an end to speculation about a possible reform for the following year.
