Budget blends new taxes, spending cuts, and deficit financing

Finance Minister Agustín Carstens presented the government’s budget for 2010. The highlight was a new 2% “Contribution to Alleviate Poverty,” assessed on the value of all goods and services, with the proceeds dedicated to increased funding of anti-poverty programs.  Other tax increases, including a 2% increase in the maximum income tax rate, a new 4% tax on telecommunications services, an increase in the tax on cash bank deposits, and higher excises are intended to offset the permanent decline in expected oil revenues. Total government programmable spending would be reduced by 3.4%, including the absorption of the Ministries of Tourism, Agrarian Reform, and Public Function by other agencies. The Public Sector Borrowing Requirement was pegged at 3.1% of GDP for 2010, with plans to return to balance by 2012. (Hacienda 9/8)

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