Mexico will need more tax reform, government says

By Noel Randewich and Luis Rojas Mena

MEXICO CITY (Reuters) - Mexico needs more reforms to improve its fiscal take and reduce its dependence on oil exports and may eventually have to tax food or medicine, a senior government official said on Tuesday.

President Felipe Calderon pushed a fiscal overhaul through Congress last year, increasing Mexico's tax revenue and helping to pay for billions of dollars of investments to build highways and other infrastructure.

But slowing oil production, which accounts for more than a third of government revenue, means more taxes will have to be raised by future presidents, Deputy Finance Minister Jose Antonio Meade told the Reuters Latin America Investment Summit.

"Without a doubt another tax reform is needed, but not necessarily in the short term," said Meade, who is in charge of government income at the finance ministry.

Much of last year's fiscal reform revolved around a 16.5 percent minimum tax meant to close countless loopholes used by companies to minimize or erase their tax bills.

With taxes on businesses improved, more contentious increases in taxes on consumer spending are an obvious next step, Meade said.

Many economists say the most effective way to increase fiscal revenues is to tax the sale of food and other goods bought by consumers.

But Calderon's predecessor, Vicente Fox, met overwhelming resistance when he pushed for a fiscal reform that centered on extending Mexico's 15 percent value added tax to food and medicine, a proposal widely seen as unfair to the poor.  Continued...