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Fox Touts Fiscal Reform Package Set Aside by Mexico's Congress - 2002-01-08

Mexican President Vicente Fox is optimistic his country will maintain its economic strength in the year ahead in spite of the Mexican Congress' failure to pass his comprehensive fiscal reform package. The president has not given up on achieving that reform.

The decision of the Congress to set aside the reform proposal and to pass a hodgepodge of new taxes on luxury items, soft drinks and other consumer items is viewed as a setback by Mexican President Vincente Fox. But Mr. Fox says he has not given up. Speaking to VOA on Tuesday, he stressed he still believes his comprehensive tax reform proposal would strengthen the economy and reduce poverty.

"It is very positive in several aspects," said Mr. Fox. "One has to do with stability. That reform will bring additional stability to the Mexican economy and that will permit us to have a very short, very small deficit, which again strengthens the capacity of our economy. Number two, it brings in resources to be able to put in investment in human capital, specifically education, health and programs to combat poverty in Mexico."

President Fox said the taxes passed by the Congress in the early hours of the new year are insufficient to accomplish the goals his government set out. The taxes approved by the Congress would provide about half of the revenue the Fox government had requested for this year.

In addition, the Congressional tax measures are under attack from legal experts and financial accounting firms who note that some of the taxes are unconstitutional or legally flawed in other respects. The Mexican constitution requires that the budget be approved prior to the end of the year, but, in an all-night session, the Congress ended up passing many of the taxes after midnight on January 1.

The new taxes are also facing a number of court injunctions resulting from legal challenges brought by various industries. For example, legal experts say the Congress erred in applying a new tax on cellular phone calls, using a type of tax designed for such consumer items as cigarettes and beer.

For the moment, however, the Fox government appears willing to live with the revenue provided by the new taxes. Finance Minister Francisco Gil Diaz calls the tax measures "a step forward." International financial agencies are also taking a flexible attitude regarding the new taxes. The rating agency Standard and Poor's has called on Mexico to reduce its dependence on oil revenues for government spending and Mr. Diaz says he believes the new taxes will help in that regard.