Mexico’s state-owned oil company will receive MXN 65 billion ($2.6 billion) in tax cuts under a proposed spending plan intended to create 2 million new jobs.
The tax cut will help Petróleos Mexicanos (Pemex) deal with the plunge in international oil prices as a result of the coronavirus crisis, according to President Andres Manuel López Obrador.
The government had announced plans to help the company increase oil production in July 2019, which led to the inclusion of tax breaks for the company in the 2020 budget.
The new MXN 576 billion spending plan proposed by López Obrador will be funded through savings from the Fondo de Estabilización de los Ingresos (Budget Revenue Stabilization Fund) and austerity measures within the public sector.
"The salaries of high public officials will be lowered, and the bonuses will be eliminated from the position of deputy directors to that of the president,” López Obrador said in an April 5 press conference. “Government advertising spending will be reduced. Travel expenses [and] operating expenses will be reduced, and more will be saved in purchases from suppliers and in the costs of public works contracted with construction or service companies.”
In addition to a forthcoming MXN 339 billion investment in the energy sector, the plan – which corporate business leaders have criticized as not providing enough relief — includes MXN 25 billion for infrastructure projects benefiting the poor; MXN 177 billion in housing loans to support hires in military service, healthcare, food production, and more; and MXN 35 billion for construction of two major railway projects.
López Obrador stressed that there would be no new taxes and no hikes in gasoline prices to finance the plan. The government will accelerate VAT refunds and contribute 400,000 barrels of oil to the production of gasoline to cut down on purchases made outside Mexico, he said.
Consejo Coordinador Empresarial (Business Coordinating Council), the largest business lobbying group in Mexico, criticized the plan for not going far enough to combat the effects of the coronavirus crisis.
“We . . . welcome some of the measures, such as their commitment to increase public investment to generate jobs, the expansion of the credit program of development banks and housing institutions, and its instruction to the [State Administration of Taxation] to expedite pending VAT returns to companies,” the group said in an April 6 statement. “Unfortunately, it seems to us an incomplete response to the great dimension of the crisis we are facing.”
In an earlier statement, the organization said that it did not want tax reductions, but it requested several relief measures to free up liquidity for businesses facing revenue losses because of the crisis. Those include the deferral of individual and business tax filing deadlines for six months, ability to pay taxes in 12 installments, automatic decreases of provisional tax payments for the 2020 financial year, expedition of VAT refunds, and a temporary measure allowing taxpayers to offset balances through 2020.
López Obrador has since criticized large businesses for not paying taxes and instating layoffs during the crisis.
“Maybe some of these companies don't even know it, because it was a management of their offices to save them expenses, but it hurts workers, human beings,” López Obrador said in an April 8 briefing. He said he would like to publicize a list of 15 large companies owing MXN 50 in taxes, adding that the government would be able to use that money to help small businesses hard hit by the coronavirus crisis.