Fox is counting on a restructured tax system to provide revenue to pay for his promised increases in education, health and other social programs. The most controversial part is to extend to medicine and food the 15 percent sales tax already levied on many other items. But the plan also simplifies the tax code and reduces corporate and income tax rates in an effort to get more people now evading taxes to pay up. The maximum tax rate would be lowered from 35 to 32 percent for corporations and from 40 to 32 percent for individuals as part of the effort to reduce Mexico's chronic tax evasion. Mexico has one of the lowest tax collection rates among industrialized nations.
Most industrialized nations collect two to three times that amount.
It is a reform designed to spur economic growth, to generate wealth so that every family can have opportunities in this country. Debate over Fox's tax plan, along with legislation to give greater rights to Mexico's 10 million Indians, is expected to dominate the current session of Congress and provide the first major legislative test of Fox's young government. Although Fox has won high marks for his performance on foreign affairs since he was inaugurated in December, he has had few big victories on domestic policy. Fox, who has been criticized for promising much and delivering little, is counting on passage of these two high-profile bills to turn rhetoric into substance. Critics, including many legislators, have blasted the plan to tax food and medicine as unfair to Mexico's 40 million or more poor people.