Economics: Postponing fiscal reckoning with no plan
The administration of President Andrés Manuel López Obrador has been proactive in fiscal matters, but with a decidedly short-run focus that was clearly on display in the 2020 fiscal results. For starters, the government delivered a real-term 0.8% increase in federal government tax revenues last year even as the economy contracted 8.5%. And even as petroleum revenues plunged a real -38.7% on weak demand and soft prices, and those collected from Pemex and excise taxes fell, federal budgetary non-oil revenues from both tax and non tax sources increased a real 5.3%.
But those results were achieved on the basis of one-off moves to get every possible peso out of existing major tax payers and from every nook and cranny of public administration, and not on efforts to expand the tax base. The tax authority managed to expand income tax collections 0.9%, above all thanks to its extraordinary efforts to collect outstanding taxes through audits, fines and reclaiming fiscal credits. Moreover, the federal government drew 156.7 billion pesos from the country’s Budgetary Revenue Stabilization Fund, leaving a mere 9.5 billion pesos in reserves, and siphoned 55.3 billion pesos from public trusts.
When it comes to spending, the current administration has been characterized by austerity policies applied with an ax rather than a scalpel, a concern magnified by the limited extent of cash transfer or subsidy measures for assisting the families that have been left with the greatest needs as a result of the pandemic-related economic crunch. And from a longer-term perspective, the 2020 public finance results mark a deviation from the objective of containing public debt, making it clear that in lieu of a much more substantial effort to expand public sector revenues at the federal, state, and municipal levels, and from social security, Mexico will continue suffering all the weaknesses inherent in the country’s fiscal precariousness.
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