Introduction
Last week in Cuernavaca, Morelos, a working session was held, driven by the Secretariat of Finance and the Morena bloc in the Chamber of Deputies, to address fiscal matters crucial for national economic development and the solidity of public finances. The event brought together state finance officials to discuss strategies for enhancing revenue collection, updating property records, and promoting subnational financing to boost economic growth and reduce federal budget dependency.
The Tenencia Vehicular Tax: A Historical Overview
The first panel focused on the collection of the tenencia vehicular tax, which originated in 1962 as a temporary measure for the 1968 Olympics. This tax became a significant revenue source for states until, due to populist and irresponsible policies by governors—mainly from the PAN party—it was abandoned nationwide starting in 2000. Consequently, non-residents of Morelos have been registering vehicles in the state, leading to Mexico City residents driving cars with Morelos plates.
Now, there is a growing movement to harmonize this tax across all states, using Colima and the State of Mexico as models. This would help state finance departments build comprehensive vehicle registries and adopt best practices for collecting the tenencia tax on various vehicles, boats, motorcycles, etc. The urgency was emphasized to enact a uniform law that would provide states with resources for addressing their road and mobility needs, preventing further deterioration of cities.
Updating Property Records and Increasing Predial Tax Revenue
The second panel addressed the necessity of updating property records and increasing predial tax revenue and the number of taxpayers. State officials stressed the importance of this tax and property records in providing legal certainty to individuals’ assets. They also discussed using the property registry to collect other services, such as water and solid waste management, following the practices of major global capitals. Predial tax revenues should finance water supply projects, public lighting, and green areas, among others, which are desperately needed.
Subnational Financing Mechanisms
The final panel focused on various subnational financing mechanisms through development banks or the private financial system. Emphasis was placed on states’ capacity to borrow for productive infrastructure development, given the significant reduction in federal public investment in infrastructure. States could stimulate local investment with high-quality, self-sustaining, and profitable projects with public value.
The Path Forward
By implementing these measures, states could substantially increase their revenue collection, reduce federal budget dependency, and improve their participation coefficients. Without additional public resources for investment, states are destined to manage a meager existence, failing to boost competitiveness in their economies. However, with greater resources, states can foster more dynamic growth by complementing private sector investments and transforming themselves into more attractive destinations with improved conditions for expanding business productivity.
Key Questions and Answers
- What was the main topic of discussion at the working session? The main topics were enhancing revenue collection through the tenencia vehicular tax, updating property records for increased predial tax revenue, and exploring subnational financing mechanisms.
- Why is harmonizing the tenencia vehicular tax important? Harmonization would help states build comprehensive vehicle registries, adopt best practices for tax collection, and prevent non-residents from registering vehicles in other states, ensuring fair taxation.
- How would updating property records benefit states? Updated records would provide legal certainty to individuals’ assets and enable states to collect additional revenue through property-related services, financing essential projects like water supply and public lighting.
- What role do subnational financing mechanisms play in economic growth? These mechanisms allow states to borrow for productive infrastructure development, stimulating local investment and complementing private sector contributions to foster more dynamic economic growth.
