Background on the Alianza por la Justicia Fiscal
The Alianza por la Justicia Fiscal is a coalition of civil society organizations advocating for a progressive tax reform to increase public income. Their recent analysis highlights the need for states to bolster their own revenue sources, as federal dependency has limited their fiscal autonomy.
Fiscal Space Growth and Its Nature
The fiscal space available to the federated entities has been increasing over recent years, but this growth stems from reliance on federal resources rather than strengthening their own income sources, according to the Alianza por la Justicia Fiscal.
- By the end of 2023, the average per capita fiscal space for federated entities was 9,549 pesos, a 9% increase from 8,759 pesos in the previous year.
- From 2018 to 2021, the fiscal space per person decreased by 16.3%, but from 2021 to 2023, it increased by 9.8%. This rise corresponds with an approximate 8% increase in federalized spending during the same period.
The Alianza points out that despite the upward trend in fiscal space, it has primarily resulted from federalized resources rather than strengthened state income sources.
Underutilization of Available Imposts
One reason for the low revenue collection by states is their underutilization of available taxes. In 2019, out of the 18 potential impositions (excluding additional and accessory taxes), only eight were applied by the states.
The Alianza emphasizes that in a context where federal transfers can be volatile, it is crucial for state and municipal governments to enhance their self-generated revenue.
Recomendations for Increasing State Income
Tenencia Tax:
To boost state income, the Alianza por la Justicia Fiscal recommends implementing a tenencia tax with an ecological component across all entities.
- Focusing on tenencia would promote greater equity in revenue collection and reinforce fiscal autonomy for federated entities.
- In recent years, tenencia has become a less significant income source for states due to non-collection or reduced rates in various entities.
- Between 2014 and 2023, tenencia revenue dropped by 43.7%, while the vehicle park in Mexico grew by 118% during the same period.
The Alianza suggests that state governments can expand their fiscal space through tenencia collection. Simulated scenarios by the CIEP estimated potential revenue between 82,400 million and 89,800 million pesos—more than four times the current collection—which would benefit all entities.
These resources should be allocated to specific purposes that improve people’s quality of life, such as funding for public transportation infrastructure development.
Key Questions and Answers
- What is the current state of fiscal space for federated entities? The average per capita fiscal space for federated entities by the end of 2023 was 9,549 pesos, a 9% increase from the previous year.
- Why is it important for states to strengthen their own revenue sources? Federal transfers can be volatile, making it crucial for state and municipal governments to enhance their self-generated revenue.
- Which tax does the Alianza por la Justicia Fiscal recommend implementing to boost state income? The Alianza suggests implementing a tenencia tax with an ecological component across all entities.
- How much additional revenue could states generate through tenencia tax collection? Simulated scenarios by the CIEP estimated potential revenue between 82,400 million and 89,800 million pesos—more than four times the current collection.
