Congress fails to back legal challenge to closing Luz y Fuerza

Efforts by the PRD and PT in Congress to challenge the liquidation of Luz y Fuerza on constitutional grounds fell well short. Only 132 Deputies of the required 250 signed the resolution, as the PRI stood aside. If the resolution had passed, it would have obliged the Supreme Court to review the liquidation decree. After the motion failed, Labor Secretary Javier Lozano promptly reopened the centers for former employees to sign up for the buyout payments. The second round of buyouts will provide only 70% of the amount that was available in the first round, and will be available until December 23. (Universal 11/25, 11/26)

Chamber approves 2010 expenditure law

The full Chamber of Deputies voted 425 to 25, with 4 abstentions to pass the 2010 expenditure law. The PRI, PAN, PVEM, PANAL, and Convergencia all voted unanimously in favor. The PRD voted 45-18 to support the budget, while the PT voted 4-7 against. The vote took place in the early morning hours of the 17th, with the clocked stopped, since the legal deadline for passing the budget was the 15th. (diputados.gob.mx)

Expenditure budget passes

The budget commission of the Chamber of Deputies unanimously passed the 2010 expenditure budget at 4:30 am, after failing to meet the midnight legal deadline. PRI coordinator Francisco Rojas postponed four times the meeting of the full Chamber of Deputies, as factions within the party negotiated the reallocation of funds between the states and to different programs. The full Chamber is expected to vote on the package today. The final compromise was reflected in a basket of Ps. 96.6 billion of resources to be reallocated, an increase from the original proposal of Ps. 85 billion. Total expenditures were pegged at Ps. 3,176 billion – only marginally higher than the proposed budget sent by the Government.  One of the items that emerged from the congressional negotiations was the requirement that the Ministry of Finance present to congress an austerity plan by March 15 for longer-term improvements in the use of public resources. PRI deputy Sebastián Lerdo de Tejada explained, “We can’t ask the citizen to tighten his belt and not demand that the … executive, judicial, and legislative authorities do the same.”

The Templo Mayor column observed: “Almost everyone is content with the slicing up of the budget pie. The priistas are congratulating themselves because they … tied the hands of the federal government and got millions and millions as a gift for their governors. The panistas are also jubiliant; despite the dark warnings, at they end of the day they salvaged the resources for the three [social] programs dear to Felipe Calderón: the leafless Proarból, the coveted Oportunidades, and the supercharged Seguro Popular. (Excelsior 11/16, Universal 11/16, Reforma 11/16)

PRI avoides costs of voting for higher taxes, gets benefit

The Senate passed the major revenue measures previously voted by the Chamber of Deputies, including a 1% increase in the value added tax.  The key vote was 53-28, with 7 abstentions. The PAN, PVEM, and one PANAL senator voted in favor; the PRD, PT, and Convergencia voted against. Most of the PRI senators left the Senate chamber prior to the vote and the seven who remained abstained, based on an agreement with the PAN. Commentators noted that the major beneficiaries of the VAT increase will be the state governors (mostly PRIistas), who will get one-third of the additional tax take.  A summary of the tax measures can be found here. Government Secretary Fernando Gómez Mont applauded the vote: “The agreements reached signify patriotic conduct by the actors; the federal government wants to recognize the will of the parties in putting the national interest ahead of politics.” (Universal 11/2)

President blasts private sector over taxes

In two separate speeches, President Felipe Calderón vehemently attacked the private sector for its opposition to the fiscal program, alleging that the largest groups “rarely” paid taxes: “What seems to me unacceptable is that the giant corporations demand that the government cut spending, and the government cuts it; that they demand that the government tax food and medicine for the poorest, but … on average they pay only 1.7% in taxes. This cannot be! I am not asking for sacrifices. … I am asking that the companies also pay, even if just a part, of the taxes that the Mexican people need,” he said. Columnist Sergio Sarmiento said that Calderón’s ‘economic mentors’ seemed to be former Presidents Luís Echeverria and José López Portillo. Sarmiento also claimed that Calderón’s math was bad and that tax payments by large corporates were 26% of pre-tax income, “more than in other countries.” (Milenio 10/30, Reforma 11/2)

Fate of radio spectrum royalty payments unclear

The Senate voted to kill the 2-year exemption from royalty payments for the soon to be auctioned radio spectrum frequency blocks for wireless carriers. However, the Chamber voted 252-143 in a non-party line vote to reject the Senate version and reinstate the exemption. PAN deputy Javier Corral called it “an undue fiscal privilege” for highly profitable telecoms companies at a time when the rest of Mexicans were being asked to pay higher taxes. The Chamber and the Senate must now reconcile their positions. (Universal 11/1)

Twitter campaign (maybe) beats back Internet tax

The cyber campaign waged on Twitter to exempt Internet services from the new 3% telecoms tax appeared victorious, as the Senate voted to reject the tax. Activists noted that the fine print excepted Internet services only when purchased separately; if purchased as part of a package with other telecoms services, they are probably subject to the tax. (SDP Noticias 10/31)

Giveaway to Televisa could cost government Ps. 2 billion

Business columnist Alberto Aguilar provides more color on the pro-Televisa parts of the tax package in his El Universal column today:

It was a surprise that the Deputies supported an exemption from the payment of royalties for the companies that will participate in the radio frequency auctions expected to take place during the year. The draft bill has some unusual features, linked to the pressures that the large groups in this sector are exerting.

Cofetel [the Federal Communications Commission] … sought, for example, to restrict the 1700 Mhz packages to new players, among whom Televisa will certainly be one…. The CFC [Competition Commission] ruled to eliminate the exclusivity of one of the packages, which would also be capped at 30 Mhz [of bandwidth]. If Cofetel agrees, the terms of the call for bids will be published shortly.  But beyond this, as it happened, the Deputies approved an exemption for royalty payments for winners of the 1.7 and 2.1 GHz bands. In this exemption, Televisa will also be one of the big winners, since it will certainly participate… The exemption from the payment of royalties will cost the Ministry of Finance Ps. 2 billion….

What was approved was an amendment to section “E” of Article 244 of the Federal Royalties Law. During the debates, it was difficult to identify who was responsible for the proposal.

The proposal was almost at the point of being thrown out … until Deputy Alberto Cano Vélez (PRI) of the Finance Commission accepted responsibility. … It was said that the pressure was such that the PRI conditioned, together with the PAN, its approval of the other relevant points of the fiscal package on this. The subsidy for the participants in the frequency auction was also gallantly defended by Gerardo Flores of the Green Party, who in the past had ties with the Radio and TV Chamber. The amendment to the Royalties Law is now in the hands of the Senate, which will decide whether to approve or not this sacrifice in favor of an industry that has continued to grow, even during the crisis, and all based on the argument that this measure is needed to attract new foreign players.  While everything indicates that Mexicans will pay more taxes in 2010, the PRI and the PAN are working hard to sustain a country in which privilege still prevails.

Tax package faces uncertain fate in Senate

Despite the overwhelming vote in favor, all the parties immediately started attacking the tax package that was passed, and pledged to change it in the Senate. A firestorm started when PAN party leader César Nava said that the PAN voted for the package “because the PRI did not leave us any other alternative. Faced with their opposition, their closed-mindedness, and their rejection of the President’s proposal … we had to fall back on this alternative.” The PRI issued a statement condemning Nava’s attempt “to provoke a lynch-mob environment,” and threatened to reject the entire package in the Senate. The PRI leadership met Sunday night to define their position toward the tax package, but adjourned without a consensus. The Senate deadline for voting the revenue measures is Friday. (Universal 10/23, Reforma 10/26)

Business groups attack retroactivity

Business groups and large corporations focused their opposition on the new tax consolidation rules, which allow large groups to offset taxable income in one legal entity with taxable losses in another. The bill passed by the Chamber—adopting the government’s proposal—will shorten the time limits for realizing the offsets and paying any deferred taxes, in what many interpret as a retroactive change in tax law. The Ministry of Finance estimated that the measures would raise Ps. 16 billion in revenue in 2010. Both the PRI and the PAN in the Senate have pledged to review the measure, and are negotiating with the Ministry of Finance. (Excelsior 10/26)