Poverty in Mexico increased by 3.8 million people between 2019 and 2020, according to calculations by the International Monetary Fund (IMF). This means that the number of people in poverty has increased from 51.9 million in 2018 to 55.7 million in 2020.
Without undermining the deterioration in the living conditions of the people affected by the pandemic, experts from the agency explained that the cash transfers distributed by the Mexican government in the health crisis prevented another 2.5 million Mexicans from reaching the pandemic. lower levels have lapsed.
Within the working document, entitled Social Spending in Mexico: Needs, Priorities and Reforms / Priorities and reforms for social spending in Mexico, IMF experts acknowledged the government’s concern about the well – being of families with the least and suggested that mechanisms be sought. to enlarge the public. income.
However, they stressed that the global context is not conducive to finding financial alternatives in the market. They refer to the lower dynamics of the world economy due to inflation and the increase in infections, as well as the tightening of global financial conditions expected for this year.
The recommendation of the IMF experts is to apply a series of regulatory changes in fiscal matters and refine the efficiency of public spending so that the government’s capacity to distribute resources can be expanded.
In fact, the staff of IMF economists has proposed implementing a series of reforms that allow public spending to be increased by up to three points of GDP.
Health, education and social programs
In the document, led by Swarnali Ahmed Hannan, an economist at the institution of the Western Hemisphere at the institution, they recommended taking “an initial pragmatic step” considering the equivalent of 2 points of GDP to social projects , education and health and allocate 1%. of the product for investment in infrastructure.
The IMF experts also said that it would be pertinent to review the social programs maintained by the government. This will serve to identify areas of opportunity to reinforce them.
They specifically referred to Bursaries for Basic Education for Welfare as well as cash transfers for families with fewer resources that are not conditioned for regular student surveys.
In the document, they explain that if the destination of these resources is monitored, it can be guaranteed that school dropouts will not increase, and it can be more certain that students will not see losses in their nutrition and health.
According to Monetary Fund economists, another factor limiting the ability to raise public revenue in Mexico is the high level of informality that prevails in the labor market.
Tax reforms as GDP strengthens
In the working document, they emphasize that Mexico is significantly behind the regional economies and the members of the Organization for Economic Co-operation and Development (OECD) in collecting non-oil taxes.
Consequently, they observe that it will be necessary to implement tax reforms in the medium term.
These regulatory changes will be implemented gradually as the economy strengthens. In this way, if the government has higher tax revenues, it can finance social development projects and use them to reduce public debt.
In this particular document, they did not set out the recommendation for the increase in tax revenue, but it is an issue that they have been consistently proposing since at least 2018.
The IMF reiterates that the tax base of Value Added Tax (VAT) can be expanded; reduce the exposure of income tax to income tax (ISR); increase property tax collection, supplement vehicle ownership and adopt a comprehensive “with technical assistance from the Monetary Fund” strategy to reduce tax evasion.
This collection strategy can be developed in the medium term, and will allow at least 2 additional points of GDP, only with the application of fundamental reforms to VAT, such as generalizing the collection, reducing evasion, making it progressive and withdrawing the zero rate .
Reference-www.eleconomista.com.mx