Mexican President Felipe Calderon's government on Wednesday submitted to Congress a long-awaited proposal to boost tax income and wean the country of oil revenues. Mexico has one of the lowest tax rates in Latin America, and sorely needs a fiscal overhaul to boost income.
Winning congressional approval a the tax package is a top priority for Calderon, who won last year's presidential elections by less than a percentage point. The government said in a letter to lawmakers that it sought a flat tax on businesses. A government official also said a tax of 2 percent on monthly cash bank deposits of more than 20,000 pesos ($1,860) was also in the package.
A 20-percent levy on gaming was also being discussed for inclusion in the bill. Finance Minister Agustin Carstens was to hold a news conference later on Wednesday to disclose details of the bill, which the government hopes will be approved by September.
Mexico, a major supplier of crude to the United States, fears its oil wealth will drop as the giant Cantarell field in the Gulf of Mexico runs dry in the coming years. Oil revenues have long funded about a third of Mexico's budget, but at the cost of depriving state oil monopoly Pemex of vital funds for investment.
The ruling conservative National Action Party is the biggest group in Congress but Calderon needs help from opposition lawmakers to pass the tax bill. His predecessor Vicente Fox failed to get any meaningful economic reform through a hostile Congress in his six years in office.
Many investors expect credit ratings agencies to increase Mexico's debt rating, which would lower the country's borrowing costs, if Congress substantially increases revenues. Mexican stocks retreated slightly and the peso traded flat on Wednesday morning.