How can we advance without a tax increase?

There has been a lot of buzz recently in Mexico after a tax increase that has been announced for next year. The two main points I have seen criticized are:

Value Added Tax (IVA) increase from 15% to 16%

There was a great improvement regarding the original proposal by our de-facto ruler (why de-facto? Because it is still unclear whether he won the popular vote. He has about the same legitimacy as George Bush during his first term: Legal but illegitimate): In Mexico, there is a category of items regarded as fundamental, which are exempt of IVA (tasa cero). This category includes food and medicines — Of course, this category makes up the bulk of the poorer people's consumptions, so they pay much less IVA than people with higher living standards. For a very long time, there has been a push to remove this exemption. This has been fortunately clearly understood and fought against.

So, the presidential initiative, as I was saying, contemplated a global 2% tax which would not be IVA, and which would be applied universally. This tax would be earmarked to be applied to social programs, and was euphemistically called Impuesto de Combate a la Pobreza (poverty combat tax). Many people applied the concept of duck typing (if it looks like a duck, walks like a duck and quacks like a duck... It is a Value Added Tax). As many analysts, I believe this tax was meant to be the foot in the doorstop, leading to point out in a couple of years that anyway nothing is IVA-exempt anymore and the world has not come to an end, and we should apply universal IVA...

So, the reduction in the increase (2% → 1%) is not the most notable thing here — The notable (and good!) thing is that they didn't succeed into killing the tasa cero.

3% tax on telecommunications

Many friends have started rallying (with the IMHO least effective way of protest you can find on Earth, just by stating their adherence in their Twitter and Facebook profiles. Wow, great deal!) that the original proposal included a 4% tax on telecommunications, and it appears that 3% will be applied. They say, quite fairly, that telephone and Internet access are no longer considerable a luxury, but a need to power the society into becoming better prepared, more competitive.

My friends state as a contrast the Finnish ruling broadband access as a citizen right. What they seem not to realize is that the proportion of taxes in Mexico (collected from the responsible taxpayers, which is not by far the way for the bulk of the money in this country) is close to 30%, taking into account the big taxes (IVA, ISR/IETU) and the host of smaller ones. In Finland, the percentage of taxes payed by every person –and remember that tax evasion is way lower than here!) is over 50%.

So… What is my opinion on this? What would my ideal tax scheme be?

• Nobody likes taxes. But the country needs far more infrastructure, far wider inversion. We need higher taxes — But we need those taxes to be collected from people with higher income. And yes, that would mean I would most probably pay more (as I do sit relatively high on the income scale — Qualified work, even if you do not seek money for the sake of it, pays much better than non-qualified work; remember the minimal wage in Mexico is around MX$50 a day - Less than US$4 or €3).
• The increases should be applied to the income tax (ISR). It is supposed to be around 30% for income levels over MX$5000 a month, with a very slight increase after that point. Income tax is highly deductible now, and most people with high income manage to ellude most of it. Many cases have been documented of companies as small as Walmart paying less than MX$1000 a year due to several (intentional? you bet!) holes in the legislation. That is where the bulk of the extra government income should come from!
• For a couple of years, since I registered as a taxpayer (people receiving money exclusively as salaries under a given limit don't have to declare taxes) I have decided not to hire an accountant to make the numbers look prettier, and just do the numbers myself over the platform provided by SAT/Hacienda (the recaudatory authority). Yes, that means I am paying more than what I could — But it also means I am paying what I should! And it is an expensive point of view, but I strongly invite others to do the same. If we criticize Walmart for making numbers look prettier, shouldn't each of us do the same? Shouldn't we all care to pay what we are supposed to, so that the government has enough funds to carry out its tasks?

Yes, I am painfully aware that an important portion of what gets into the government disappears due to corruption and ineptitude. Still, the only position from where I can criticize is from being clearly legal. The same point as I do with software: I cannot ask people to comply with my Free Software licensing if I use ilegally propietary software, can I? So no, I don't use any. Even legal propietary software, free-as-in-beer (i.e. Flash player).

So, please think this over before you join the Lemmings into complaining about the tax increase. Yes, this is a bad moment to increase taxes. Yes, Mexico is the worst faring country in all of America in its response to the crisis; the GDP will probably fall between 8% and 10% this year and 2010 will not be much better. Yes, it would be better to increase competitivity. But, yes, we pay ridiculously low amounts of taxes — And those of us who can afford a little reduction in our expenditure should do it. And those who make gross money should just stop it.

Oh, and last point, regarding the #internetnecesario Twitter hashtag: Don't be Lemmings. Internet should be recognized a basic need for a free society. But right now in our country, it completely is a luxury, even if you cannot live without it. If you are Internet-addicted as myself, you most probably will not notice the 3% increase. FFS, We will pay MX$360 instead of MX$350 a month for my Infinitum connection. Will we really notice? In Mexico, middle and upper class are Internet-enabled. Lower classes are not. Things should change, no doubt. But it is not at all comparable to an universal IVA. Things should change and universal connectivity should be a given. But right now, calling Internet a basic good... is just out of touch with reality.