México, if you remember from previous columns, has a huge tax collection problem for the needed funds to run the government. The tax collection rate in México is only 11% of the GDP (Gross Domestic Product) and this even includes 60% of the sales of our national oil company (PEMEX) right off the top. While PEMEX accounts for 1/3 of the federal tax revenue for México, it also leaves PEMEX, now $43 billion dollars in debt, technically broke.

     But compounding the problem is the "informal" economy in México that pays no taxes whatsoever. The government admits this off the books informal economy accounts for over 30% of our GDP. Others estimate that this figure is almost 50% of our GDP, but any figure that you care to use reveals a ridiculous situation. In fact, it is impossible to exist in México without doing business with the informal market. Fix your car? Repair or build a house? Go to almost any small store for any product? You will deal with the informal market.

     The tax laws and rules are rife with loopholes for the top earnings brackets in addition to just plain corrupt tax collection practices. Professional tax cheating experts for hire abound here. So, the only thing that is keeping the government afloat is the national "sales tax", our IVA (15% value added tax) that is supposed to be collected on almost every legal sale except food and medicine. But remember that IVA is not collected in the huge informal market. The end result is that while tax collection falls short on the upper earnings brackets, it is hardly collected at all from the vast lower earnings brackets that does most or their business in the informal market. Who does get hit are the beleaguered middle class taxpayers. At least those who try to be honest.

     While the informal market is completely out of hand (it would take the army to try and enforce tax collection there), some of the steps that the federal government is taking is just short of insane.

     We now have a new government backed TV show where participants play in a lottery for prizes but are required to prove that they are actually taxpayers to participate. The idea is to promote paying taxes. This show would be worth a good belly laugh if it weren't so pathetic. Can you imagine the IRS in the US resorting to silly things like this to improve tax collection?

     Another thing that drives down the tax collection is the constant "streamlining" of the paperwork required to pay taxes. Every year, the government keeps adding pages to the required paperwork, which in effect drives more and more into the informal sector.

     Let's look at how paying taxes worked until this year. Say you operate a legal small business and pay your taxes month by month (much as you would in the US with "estimated" taxes) and make your annual filing at the end of the tax year. In order to do this, you fill out the paperwork and go to your local bank, stand in line, pay, and are given a receipt. If you don't have a checking account you have to pay in cash. The government mandated paying and filing at the bank, but you could do this as you paid your normal utility bills at the same time.  Remember that México doesn't have a functional postal system. Not using the bank for paying your monthly bills would require you to spend at least a day every month to go from point to point and stand in more lines and pay cash. But you have to have a checking account. But most Mexicans do not.

     And as far as simplicity goes, here is how you had to make out your check to pay taxes at the bank: On the front, the payee is "Tesoreria de la Federacion". No abbreviations. On the back you write "Cheque librado para el pago de contribuciones federales a cargo del contribuyente (your name) con Registro Federal de Contribuyentes (your tax identification number). Para abono en cuenta bancaria de la Tesoreria de la Federación." This must be done letter perfect. Any tiny error negates the check. Of course, in the US you can simply write "IRS" and your tax in identification number on the front. Nothing on the back. But that would be too simple for our bureaucracy here!

     Now we go into the New Year of 2006. Another change to "streamline" tax collection! From the first of the year, you don't go to the bank to pay your taxes. Now you pay your taxes on the Internet. The modern age comes to México! This is not an option; it is mandatory.

     This probably came about because the banks here, while acting as bill collectors, charge for their services. In fact, the banks make a substantial amount of their money by collecting "service fees". The charges are discounted from the payments the bank makes to the recipients of the funds. And what probably happened is that the government, in their infinite wisdom, has decided to cut the banks out of the tax collection business to avoid the collection fees.

     Of course, the sum effect of this is to further reduce over all collection. Someone forgot to realize the fact that the vast majority of Mexicans have no Internet access or even the skill to use the process at "Internet cafés".

     So, the result of this change will be to greatly reduce the tax paying sector and further increase the informal sector. Maybe we will have an informal economy of more than 60% of our GDP now.

     Another example of how stupid and inefficient bureaucracies can get.

     But in México, we are experts.
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Richard N. Baldwin T., a HispanicVista.com (http://www.hispanicvista.com/) contributing columnist, lives in Tlalnepantla, Edo de México. E-mail at: R1041643422@aol.com