In Mexico, covid-19 not only caused a socioeconomic crisis, but also an economic political antagonism. On the one hand, Mexican companies demand government support; on the other, President Andrés Manuel López Obrador refuses to provide them with fiscal resources. We believe that there is an alternative.
The pandemic caused multiple havoc in the world, but in Mexico it worsened. Let’s look at three indicators: More than one million micro and small businesses closed (20.8 percent), from May 2019 to September of last year. Regarding employment, between March and July 2020, 1,117 thousand 584 formal jobs were lost (equivalent to the population of Nayarit); According to figures from the Economic Commission for Latin America (ECLAC), Mexico was the country where extreme poverty grew the most, going from 10.6 percent prior to the crisis, to 18.3 percent at the end of the previous year.
The arrival of covid-19 in Mexico was inevitable, but not the trigger in poverty, unemployment and bankruptcies. Various financial institutions attribute bankruptcies to the lack of fiscal support or facilities from the federal government to preserve sources of employment and protect family income. The aid varied from one country to another; the two extremes were New Zealand, which, with a population equivalent to Michoacán, allocated 18.6 percent of its GDP and Mexico only 0.6 percent.
To understand government support, let’s look at the case of Germany. This country implemented a program called Kurzarbeit (“Temporary employment” in Spanish), which has been essential to keep their workforce stable during the pandemic. This consists in that entrepreneurs, so that they do not fire their workers, are allowed to have their working hours reduced and the government pays them 60 percent of their salary.
If what President López Obrador does not want is to provide tax resources to companies, the least he could do is provide them with facilities. Thus, the government could convert the payment of taxes (VAT, ISR, IMSS, etc.) into credits, pausing fiscal payments – from moratoriums to embargoes – during 2020 and 2021. The main objective would be to provide partial payment facilities between 3 to 5 years and limit it to MSMEs, or scale it according to the size of the company.
A program of this nature would not imply a government contribution, but a simple fiscal restructuring. In addition, it is a possibility that is contemplated in Mexican law. Article 39, section I, of the Fiscal Code of the Federation authorizes the President of the Republic to allow, in extraordinary situations, such as an epidemic, through “general resolutions” (read decrees), the payment of contributions in installments or in installments, either deferred or in installments.
It is a power that, although traditionally is associated only with “omitted” contributions (read tax credits determined by the authorities; Article 66 of the Federal Tax Code), there is no plain and simple legal impediment for It is applied to the payment of contributions, such as those derived from the presentation of normal, provisional or annual tax returns.
Returning to Germany, the program Kurzarbeit has generated impressive results. During the pandemic, its GDP for the second quarter of 2020 fell 10 points but its unemployment rate practically remained the same. On the other hand, last year the GDP in Mexico not only fell 8.2 percent, but Inegi reported that 42 percent of the employed population reduced their working hours; 46 out of 100 had a drop in their income; and in 3 out of 10 households they reported that some family member lost their job.
If the president refuses to grant fiscal support due to an alleged legal impediment and because it is a government contribution, the “Taxes on Fertilizers” program would completely eliminate both concerns. This program would be a potential alternative for three reasons:
1) is a figure already contemplated in the law,
2) empowers the president to carry it out, and
3) does not involve a government contribution, but a simple fiscal restructuring.
In sum, the implementation of “Taxes in installments” does not seek to forgive or forgive the payment of taxes. No. Seeks to facilitate your payment. And with this, reopen companies, create formal jobs and alleviate poverty.
For micro and small businesses, meeting their contributions is a legal obligation. For the president, due to the pandemic, helping them to do it in installments would have to be a moral obligation, will he decide to take it?
For José Alberto Castro Vera and Juvenal Lobato
* José Alberto Castro Vera is a businessman and chairs the Policy Committee; and Juvenal Lobato Díaz is a lawyer and chairs the Fiscal Commission, both at Coparmex Nacional.