1. Introduction
In the following essay, we will present the birth of VAT and the different changes that have happened since the six-year term of President Luis Echeverría Álvarez, as well as the current tax reform, in which areas would VAT be applied and how would this affect our daily life and economy. This includes the consequences, benefits and plans that are intended to be developed during this government.
I am not trying to stigmatize my country, much less create fear and uncertainty. I only try to raise from my point of view as a student the ideas that come to my mind when reading the points proposed by Enrique Peña Nieto.
Everything sounds great, everything seems to be directed towards the benefit of all Mexicans. The rich will pay more and the poor will stay the same. It depends on the side of the currency with which you look, and if we fear change, I do not believe that any modification will make possible a positive advance in terms of economy.
Entrepreneurs could begin to feel distrust of a country that does not have economic stability and little by little our currency will begin to devalue itself even more. But let's start at the beginning.
How is VAT born?
2. Development
2.1 Background
Since the 1980s, an attempt has been made to achieve a greater collection of resources in the country. Resources obtained thanks to the rate of Value Added Tax (VAT). The first president to launch a tax reform as such was Mr. Luis Echeverría Álvarez; This reform did not represent a great improvement in the economy, since each time public spending increased, national and foreign investors began to worry that said Shared Development proposal would tax their capital income.
Later, in 1980, José López Portillo put into effect the Fiscal Coordination Law that reformed the Income Tax and created VAT, thus eliminating the federal income tax.
VAT eliminated more than thirty indirect federal taxes and 300 state taxes. But of course, said VAT rate has had to go through many important adjustments, as we currently see it during this administration with Enrique Peña Nieto.
In 1982, during Miguel de la Madrid's presidency, spending was cut and VAT increased from 10% to 15%. But in the next six-year term, with Carlos Salinas de Gortari he returned to 10%; however, the most important reform of the tax system occurred when the Tax Administration System (SAT) was granted autonomy. With this, VAT increased again to 15%, with the aim of increasing tax collection.
When in 2000 the PAN entered the Presidency of the Republic with Vicente Fox, it was also intended to carry out a tax reform that in the end was not achieved. In this proposal, it was intended to apply a VAT of 3% to medicines and food, which would increase little by little until reaching 10%.
During the past six years, Felipe Calderón and the deputies analyzed the VAT approval from 12% to 15%.
In 2009 the Senate passed wholesale taxes. The ISR increased from 28% to 30%, the Deposit Tax to Effect went from a rate of 2% to 3% in addition to being applied from 15 thousand pesos and not 25 thousand. VAT was raised from 15% to 16% and a telecommunications tax was authorized.
2.2 Theme development
On September 8 of this year 2013, President Enrique Peña Nieto presented the Tax Reform “To move Mexico on a path of greater well-being for families (…). This Tax and Social reform is a fundamental part of creating a more prosperous and more equitable Mexico. ” I quote verbatim from the official website. On October 16 the opinion of the Finance Commission of the Chamber of Deputies was given and on the 18th of the same month the plenary session of the Chamber of Deputies was approved. On the 28th the opinion of the Senate Finance Commission came out and finally on October 21 it was approved by the full Senate.
Mexicans did not know whether to be scared, happy or cry. Our biggest fear was the increase in VAT on food and medicine. If it is not enough for us with the current prices, how could we do to cover all the household expenses? And despite being one of the countries with the best social health plan, even here getting sick is expensive. In addition to this, there was talk of an increase in tuition, rent, home purchases and mortgages.
Most of the media began to deal with a story perhaps too good to be true, since in the end said VAT was not going to be charged despite the fact that the PRI itself had announced such a tax. It was a relief that did not last long, because of course, not everything is honey flakes. Was there something else behind the reform that sounded too good? The suspicion that this reform would affect our daily life grew and we began to analyze with magnifying glass all the aspects of the reform.
The second news that further aroused our suspicion was that VAT would remain at 16%. And it is not for less, fewer and fewer people trust the government and I am one of them.
While they say the reform will not affect the middle class, this is not entirely true. Firstly, VAT on pet food and on pets themselves would affect, for example, street dog and animal shelters, which subsist thanks to donations from third parties and volunteers. Most likely, many of these shelters will need to close or find other ways to manage the few resources they have. An alternative would be to join them or seek sponsorship from a company. Difficult thing, of course. In addition, many families would get rid of their animals, because of course, if we Mexicans are good at anything, it is to ignore our problems and what easier way to do it than to leave a puppy on the street. A pet is not a luxury, it is a member of the family,but how difficult it is to put the family above their own well-being. If by itself the majority do not feel the least bit of compassion for their elders, would they have it for an animal? In short, the course that the consequences of the price of pet food would take is a matter of values.
Furthermore, the fact that animals are even more expensive than they already are, could positively promote the culture of adoption. And even people who decide to buy a pet would think twice before deciding to leave it on the street; However, and knowing how Mexicans are, the black market could also occur, or grow even more, since this is already a reality.
VAT would also be added to music. Yes, if we want to go to a public show, specifically a concert will now be more expensive. This would affect the music industry but not the cinema or the theater, which will continue as before.
But something that I found interesting and perhaps good, was the VAT on the gum. How many times do we complain about walking and suddenly feel a rubber dough on the sole of the shoe? Personally, I find it in very bad taste to chew gum all day, but for the rest of the people, it seems to be a basic necessity. They cannot live without chewing something and although the increase does not make such a big difference, it could decrease their consumption a little.
They would also raise taxes on soft drinks and in general all flavored drinks under the pretext of reducing the high rate of obesity in the country. Are you doing us a favor? Possibly this does not stop families from consuming their daily coke every day because we can eat without tortillas, but without our beloved cola, ever.
Another important product will also increase, although at lower rates than the current ones, according to the government, it will be gasoline. Then we will increase the share of the taxi and the truck.
The interesting side of all this is that large entrepreneurs like Starbucks or Appel (Would this include Televisa?) Will stop abusing the tax consolidation regime and will no longer be able to avoid paying taxes, which represented a leak of income to public spending..
Another point that I consider important is the fact that foreign trade will be strengthened by simplifying customs regulations. So I suppose we would consume more foreign products than Mexicans.
The reform says that it will also boost some sectors, such as the use of renewable energy sources with green taxes, but the problem is that we do not live in a country where research is proliferating, much less focused on preserving the environment.
On the other hand, it will be easier to register to open or formalize a company, in addition to paying less. This may encourage entrepreneurs and young people to create jobs and put their own ideas into action.
3. Conclusions
Even today, I can't say if reform is a good idea or a trap. It has several points that may be attractive and even ideas that in other circumstances and perhaps with another social ideology could work, but realistically, in a country like ours, expecting positive change is something dreamy and idealistic. We have to be aware that just as we will have enough opportunities to grow, we will also pay more and wages will not rise. I am currently studying administration, and as a future administrator I consider it necessary to have the ability to prevent.
If we consider ourselves responsible people, if we believe that by having a job and a stable job we already have life, we are wrong. It is important to foster a culture of savings, where at least part of our income is treasured and grows because if the reform turns out to be more harmful than beneficial, difficult times await us where our ability to manage resources will be important to move our country forward and recover from a government we do not yet trust.
