How to prevent tax evasion?

Businesses, especially the large ones, are the ones that use all types of legal and illegal schemes to pay fewer taxes

How to prevent tax evasion?
Mexico has a low tax collection rate - Photo: Edgar Garrido/REUTERS
English 11/02/2019 09:22 Mexico City Editorial Actualizada 09:29

Leer en español

In Mexico, as in the rest of the world, the government regulates several aspects of life to improve the functioning of public life; for example, it has a monopoly of the force used to guarantee safety. But for that and other tasks, it requires resources, which are obtained through tax collection.

Periodically, Mexicans learn about new programs to increase tax collection but they are never as successful. Despite several attempts, international organizations consider Mexico's tax system as one of the systems that collect the least in comparison with the wealth generated in the country. One of the reasons it tax evasion.

Businesses, especially the large ones, are the ones that use all types of legal and illegal schemes to pay fewer taxes. They enlist groups of experts to analyze the laws and find loopholes to decrease their contributions.

As a response, the authority has only implemented actions that seem to be witch hunts or terror campaigns against taxpayers. Cases, where public figures have been arrested for problems with tax authorities, are common, which is interpreted as intimidation acts for those who don't fulfill their tax obligations.

During this administration, the Tax Administration Service will appeal to “contributory civility”, mainly among companies, instead of persecuting the tax evaders. In an interview with EL UNIVERSAL, Margarita Ríos-Farjat, the head of the SAT, said that the “sport” that consists in thinking of ways of paying fewer taxes or requesting unjustified tax returns needs to change. “The Constitution mandates to contribute to public spending if that isn't respected it's like cheating.”

The treasury's logic dictates that those who have more have to pay more, a condition that is not always fulfilled. In Mexico, there are millions of captive taxpayers who usually bear the heavy tax burden.

In order to change the culture of tax evasion, citizens have to perceive that the resources are being used correctly: allocate them to social programs but also to have good-quality services such as public transport, highways, hospitals, end even ports and parks.

It's commendable to leave persecution behind and appeal to civility but the legal coercion mechanisms the authority can use to proceed against those who constantly evade taxes can't be ignored. In regards to money, they will surely need something else besides calling people to act in good faith.

gm