OECD chief downplays Mexican impact of US tax reform

Mexico is unlikely to see a mass exodus of investment or businesses to the US with the implementation of that country's recent tax reform, according to OECD secretary general José Ángel Gurría (pictured).

"We are not foreseeing a stampede of people going to the US to take advantage of low rates," said Gurría during an interview with Mexican daily El Financiero, adding that while local tax rates may be high by international standards, "there are ways to legally and transparently reduce them as long as profits are reinvested and distributed in a certain way."

He added that while the cut in the US corporate tax rate from 35% to 21% "is impressive... the actual effective rate in the US was around 23% or 24%, because there are a series of deductions and ways to legally avoid paying taxes."

The NGO chief added that Mexico could consider a similar tax cut as long as it offsets such a move with changes to value-added tax, changes to emissions or property taxes or finds ways to broaden the tax base of contributors.

"We have a situation [in Mexico] of fiscal vulnerability, because the base upon which we charge taxes is very narrow," said Gurría. "We have to expand the base, even if expanding the base can reduce the rates."

Gurría also noted an important strengthening in Mexico's treasury with the latest fiscal reform, noting the country's ability to weather the recent collapse in oil prices due to the higher tax revenue that the reform generated.