Latin America Advisor

A Daily Publication of The Dialogue

Does AMLO Have the Right Plan to Curb Tax Evasion?

The approach proposed by Mexican President Andrés Manuel López Obrador to stem tax evasion could hinder investment and encourage people to remain in the informal sector, Nicolás Mariscal writes below. // File Photo: Mexican Government.

Mexican President Andrés Manuel López Obrador is seeking to clamp down on tax evaders with proposals to require pre-trial detention for defendants accused of the crime and potential confiscation of assets before conviction. López Obrador says tax evasion costs the country’s treasury some $25 billion annually in lost revenue. Is tax evasion as big a problem as López Obrador says it is? Are his initiatives the right way to address the problem? What would his proposals on the subject mean for the investment climate in Mexico and the country’s economy more generally?

 

Nicolás Mariscal, member of the Advisor board and chairman of Grupo Marhnos: “Tax evasion has always been a problem all over Latin America, and Mexico is not the exception. According to the Organization for Economic Cooperation and Development, the percentage of resources obtained through tax contributions is one of the lowest in the region, particularly given the total wealth in the country. Mexico’s tax revenue is only 13 percent of GDP, according to the World Bank. Various administrations have tried to tackle this problem but have been unable to alleviate the situation. In late June, the Tax Administration Service announced there were more than 8,200 companies with simulations of commercial transactions and emissions of false invoices, allowing irregularities of more than $17 billion. Tax evasion and its side effects have been a priority for López Obrador since he took office. In fact, on Oct. 15, the lower house passed a bill that would make tax fraud and the purchase or sale of false receipts a type of organized crime with more severe penalties. Now this felony falls in the same category and, hence, is subject to the same punishments as organized crime. While these measures and the relentless approach López Obrador has launched against tax evasion deserve praise, they…”

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The Inter-American Dialogue publishes the Latin America Advisor every business day for a distinguished membership of informed corporate leaders, scholars, and government officials invested in Latin America’s development and future. The Advisor‘s highly regarded Q&A section covers questions submitted by subscribers themselves. Commentators regularly include heads of state, business leaders, diplomats, economists, analysts, and thought leaders from around the world. Many of the world’s largest and fastest-growing companies subscribe to the Advisor. To subscribe click here or for more information, contact Erik Brand, publisher of the Advisor, at ebrand@thedialogue.org.


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