The political economy of tax collection in Mexico : the constraints on reform, 1970-2000
This thesis aims at explaining the reasons behind Mexico's tax revenue stagnation, by exploring the structural weaknesses of the tax system, identifying the main actors in the tax policy making process, and studying the tax reforms attempts and the role policy actors played to shape them in the last thirty years. The dissertation first shows Mexico's low tax collection yield and its stagnation for more than thirty years. The analysis portrays an inefficient tax collection system, with a tax structure plagued with a plethora of privileges and exemptions that dilute collection. A large number of interviews with public authorities, politicians, intellectual, representatives of businesses, social and international organizations showed a common concern over Mexico's low tax effort. An issue, which surprisingly has always been in the rhetoric of the political agenda, but has received very little political, social or scholarly attention. The thesis rises a puzzling paradox. By looking at the dynamics of tax reform, the evidence seems to suggest that even in a strongly centralized and hierarchical state like Mexico, frequently depicted as authoritarian, policy makers have been constrained to shape tax policy. Government's policy objectives and the "uniqueness" of the relationship with socio-economic actors, principally the business community, have affected the nature, profile and outcome of the tax reforms. I argue that the Mexican political system has been upheld by a very fragile political coalition with socio-economic actors, which has become the most important constraint on reform. The historical analysis shows that a substantial tax reform has been avoided, despite that increasing government revenue is crucial for the long-term economic development of the country. Instead, the government pursued other less politically troublesome means for financing the State. However, these alternative revenues- raising policies exacted a very high social and economic cost in he long run. The study of the tax policy decision making highlights the dominant role of politics in the policy making process, concluding the clientelism best describes the politics of tax policy making. As a result, the current shape of the Mexican tax system responds largely to the political accommodation of powerful vested interests. Economic policies have been subordinates to political stability, as well as upholding the fragile coalitions that support the Mexican political regime.