By KELIN DILLON
In the early hours of Wednesday, Oct. 26, Mexico’s Senate approved the proposed 2023 Federal Income Law in a vote of 65 in favor, 44 against and two abstentions, preserving the initiative verbatim sent by the executive branch and Chamber of Deputies, without any changes.
Set to go into effect in 2023, the newly passed Federal Income Law will allocate the federal government 8.29 trillion pesos for use in the upcoming calendar year, with a reported 4.6 trillion pesos of this sum sourcing from Mexico’s tax policy – all without adding additional tax burdens to the Mexican population nor changing any elements of the pre-established Fiscal Code of the Federation.
The 2023 Federal Income Law estimates that Mexico’s gross domestic product (GDP) will grow between 1.2 and 3 percent in the year to come, exchange rates to average at 20.6 pesos per U.S. dollar and oil production to reach 1.872 million barrels of crude oil per day, anticipated to be exported at $68.7 per barrel.
Likewise, Mexico is expected to pull in 2.51 trillion pesos through income tax and an additional 1.16 trillion pesos via its value-added tax (VAT) scheme.
The newly passed financial law also authorizes the Mexican government to operate at a deficit of 1.68 trillion pesos, which would increase Mexico’s public debt by 1 percent higher than the previous year at 49.4 percent of the GDP — a potential outcome that’s caused sector analysts concern.
“The fact that they say that the debt does not grow as a proportion of GDP is a deception, because the debt is not paid with GDP. but with tax revenues. and Mexico collects very few taxes, so if few taxes are collected, the weight of the debt is increased,” Gustavo Madero of the Plural Group told daily Mexican newspaper El Financiero, noting that Mexico has already increased its nominal debt by 60 percent across the last four years.
“The biggest is the payment of interest, because what we paid for 8 trillion pesos was 428 billion in interest, and now we are going to pay twice as much. Next year we are going to pay 840 billion pesos, almost everything that we are going to borrow, for 1.1 billion pesos to pay interest,” concluded Madero.