On September 8, the Executive, through the head of the Ministry of Finance, delivered to the Congress of the Union the Economic Package for 2021, which contains the General Criteria of Economic Policy, the initiative of the Income Law, the project of Expenditure budget for the aforementioned year, as well as the initiative to reform various tax provisions contained in the laws of the ISR, VAT, IEPS and the Federal Tax Code.

In accordance with the 2021 Fiscal Policy guidelines, contained in the General Economic Policy Criteria the Government’s commitment is maintained not to increase current taxes or rates, noting that the reform initiative contains a series of measures aimed at facilitating compliance with the payment of existing taxes and closing spaces for tax evasion and avoidance. Likewise, it is proposed to advance in the strategy of promoting greater responsibility and equity in compliance with tax obligations by taxpayers, as well as recovering the resources that are legitimate property of the State.

Although it is true that the proposed reforms do not increase taxes (except for the complementary quotas to the IEPS for fuels, which are discussed below), they do not establish incentives for investment or fiscal stimuli to promote economic reactivation.

On the other hand, economic expectations for 2021 are more optimistic than experts consider, they include an economic growth of 4.6% after the drop of -8% in GDP that is estimated for the end of 2020, an average inflation of 3.0 %, an average price of the dollar of $ 22.1 and a recovery of the average price of the Mexican oil mix to reach 42.1 dollars per barrel.

Likewise, it is expected to collect 3.5 trillion pesos of tax income, which represents a real decrease of -2.6% compared to the previous year, in addition to a reduction of -8.3% in oil revenues. It should be clarified that these comparisons are made based on the schedule for 2020, so it is necessary to consider that both tax and oil revenues are estimated to be lower than scheduled for the end of 2020, as a result of lower economic activity , derived from the actions implemented to reduce the negative effects of the COVID-19 pandemic.

Lastly, a programmable expenditure (which is intended to provide public goods and services) of 4.58 trillion pesos is planned, which represents a real increase of 1.3% compared to the previous year. While for total net spending, a decrease of -0.3% is estimated compared to 2020.

The economic package has yet to be approved by the Chambers of Deputies and Senators, so it is very likely that modifications will be made to the Executive’s proposals, and it will be at the end of October when the certainty of the reforms that will come into force will be confirmed.

The main proposals for tax reforms are:

1.- Federation Income Law (LIF)
2.- Income Tax Law (ISR)
3.- Value Added Tax (VAT) Law
4.- Law of the Special Tax on Production and Services (IEPS)
5.- Fiscal Code of the Federation (CFF