The 2020 Economic Package emphasizes the Government of Mexico's commitment to maintain fiscal policy discipline and prudence, adhering to the guidelines of republican austerity, in order to have solid macroeconomic fundamentals in an international economic environment in which uncertainty prevails.

Photo: Forbes Mexico

The will to combat tax evasion practices is evident in the 2020 Economic Package. This is presented as one of the most relevant aspects, together with the mandatory payment of VAT for digital services, as well as increases in social spending based on austerity. With this Package, 3.4 trillion pesos are expected to be collected through taxes, which represents 74.20% of the total estimated income for 2020, said Ignacio Martinez, coordinator of Analysis in Commerce, Economy and Business.

Among the aspects that this privileges are:

- Spending for programs such as life insurance for mothers who are heads of household. - 3×1 program for migrants. - Attention to day laborers. - Pension for the welfare of people with permanent disabilities and for senior citizens. - Jóvenes Construyendo el Futuro (Youth Building the Future) and others.

The Economic Package for the following year includes the Federal Expenditure Budget Bill, the Federal Revenue Bill and the General Economic Policy Criteria.

The 2020 Budget Bill allocated 451,939 million pesos to programs considered relevant to reduce poverty, which implies a reduction of 4.7 percent compared to what was approved for this year, warned the National Council for the Evaluation of Social Development Policy (Consejo Nacional de Evaluación de la Política de Desarrollo Social).

The Federal Government has emphasized not to raise taxes, however, for 2020 it has prepared a "subtle" tax miscellaneous disguised as a fight against tax evasion, which consists of limiting the deduction of interest based on profits, as well as the withholding and collection of taxes for outsourcing services, retail sales by catalog, services rendered through technological applications and similar, and adjustments to the collection of income from leasing.

Among other measures, such as the law for the extinguishment of ownership, it also reinforces the greater dependence on the Special Tax on Production and Services (IEPS) by increasing quotas on tobacco and flavored beverages, among others. For this reason, organizations have warned of the impact of double taxation with the greatest impact on the poorest population.

In terms of expenditures, the budget reaches 6.09 trillion pesos, 0.8% more than what was approved in 2019 and equivalent to 23.2% of GDP. Viewed by functional classification, spending prioritizes the energy and public and social security sectors to the detriment of economic development.

Support from Pemex is planned in order to continue the salvage program; however, it should be noted that it will continue to be insufficient.

On the business side, budgets will have to be prepared on the basis assigned in the Package, as the economic environment will continue to be complicated and market volatility will continue.

Prepared by CAINTRA, with information from Forbes Mexico, El Universal, El Financiero and Milenio. Milenio