President proposes huge tax overhaul

MEXICO CITY — Pressing ahead with plans to reshape Mexico’s economy, President Enrique Peña Nieto proposed on Sunday a sweeping overhaul of his country’s tax system, intended to collect billions of dollars to finance new social programs.

In a speech from his residence, Peña Nieto described the broad outlines of his plan, which would eliminate many loopholes and exemptions that favor the richest Mexicans. He proposed new taxes on capital gains, carbon emissions and soft drinks.

Still, he said, his proposal was good for Mexican families because the revenue it would generate would pay for a new universal pension for all Mexicans over 65, and for introducing unemployment insurance.

The Mexican government currently collects just 10.6 percent of the country’s annual economic output in taxes, less than almost any other country at its level of development. With so little tax revenue, the government has financed itself instead by squeezing money from Pemex, the state-owned oil monopoly, to pay for 30 to 40 percent of all public spending. Peña Nieto is pushing to open up the energy industry and reduce the country’s dependence on revenue from Pemex.

“We collect few taxes because we have oil,” said Juan Pardinas, the general director of the Mexican Institute for Competitiveness, a research institute. “That allows us to pay less in taxes and allows the state to make little effort to collect them.”

Peña Nieto is in a hurry. Since taking office in December, he has been able to work with the two main opposition parties to rewrite Mexico’s public education laws and promote competition in the telecommunications industry.

Under an agreement, known as the Pact for Mexico, between his party and the opposition, he is trying to swiftly inject some dynamism into an economy that has failed to grow any faster than 2 percent a year, on average, since 2001.

Even if the country’s political elite agrees to lighten Pemex’s burden and step up tax collection, popular opinion may not follow. Andrés Manuel López Obrador, the left-wing candidate who ran second to Peña Nieto in last year’s election, drew an estimated 30,000 people to a rally Sunday and promised to organize further protests against the president’s energy and tax policies.