Luis Rubio
Every time a Mexican administration exceeds its budget, protests arise in the vein of levying additional taxes. To justify this, comparative statistics are invoked among (usually dissimilar) nations or exceptional circumstances. The easy part for a politician is to seek novel wellspring of resources instead of questioning how the existing ones are employed. If the objective is to erect a superior steppingstone to civilization, one that would require a higher tax echelon, the government would have not only to raise the quality of its governance, but also that of its accountability. One is impossible without the other.
Taxes and the social contract that exists, whether explicitly or implicitly, between governors and the governed go hand in hand. Nations with heightened levels of trust and empathy tend to be characterized by governments that respond to their citizens, while those in which similar circumstances are not enjoyed tend to gravitate toward despotism. In the former, governors are subject to laws and rules that enjoy popular support, while in the latter the breach between citizens and their government is vast. That it is obvious that Mexico falls into the second group of nations will not escape any Mexican.
Europeans, Canadians and Japanese pay a much higher share of their incomes in taxes, but their quality-of-life levels are equally high: the caliber of their infrastructure, health system, educational system and public transport, to cite evident examples, are of extraordinary quality. There the streets do not have holes, electricity flows without interruptions and the police take care of the citizenry. It would be straightforward enough to argue that higher taxes translate into better services, but the evidence does not sustain that: what does allow that binomial (i.e., taxes-effective government) to function is the strength of the social pact that lies behind everything else. A serious government does not survive poor performance. In Mexico, as we have seen in recent years, the government that survives is that which utilizes public funds for private ends, not the one that advances the country’s development.
The social contract is an agreement between the government and the citizenry. It is, in essence, a pact, even if it’s implicit, by which an agreement is reached about the way public resources are collected and employed. The citizens cede some of their rights in exchange for the government’s providing them with public goods and services. The tax level matches the quality of the services and vice versa; if one attempts to alter one of these, the other must be resolved. The notion of simply extracting more resources from the citizenry without a concomitant improvement in the services implies an attempt against the country’s stability, itself already fragile. Sooner or later questions would start to be asked: What is the sense of paying more taxes only to defray the costs of excesses incurred by the government (such as PEMEX subsidies or cash transfers) without any accountability? Paying taxes assumes an exchange: When a person is obliged to pay “private taxes” -ergo, extorsion-, is it also required to pay taxes to the government that fails to guaranty his or her security against the criminals who assault them?
In the end the matter is less financial than political, more about democracy than authority. A government claiming that its legitimacy derives from the votes, not from the law, and that it controls or has eliminated all the mechanisms of counterweight can hardly argue that it is accountable or, even, that it is obliged to do so. Within that context, the notion of undertaking a tax reform entails an enormous deficit of legitimacy long before its is formally proposed.
The matter of a fiscal reform has involved years of discussion in Mexico. The fact that what technicians and politicians would have desired has not been carried out -more resources- explains the nature of the problem. There are good arguments for maintaining a low fiscal tax-collection regimen, if what is sought is attracting high investment levels, as Ireland did for many years. But, in exchange for that investment, Ireland employed existing resources in creating circumstances for that investment to come to enjoy conditions appropriate for its development. That is, it was not that it decreed a low tax-level regime and went to sleep. Other nations, such as France, are characterized by very high tax levels, but these countries offer services that satisfy the needs of their population and politicians there are always subject to citizen supervision, to democratic scrutiny and to electoral defeat. The current Morena regime does not face any of those challenges.
The fundamental point is that a government cannot pretend to effect a fiscal reform without considering a full-fledged democratic reform in which the funds to be collected as well as the way of allocating them are subject to democratic scrutiny, that is, to an effective checks-and-balances regime. The actions of the government from its initiation, with the destruction of the judiciary, point precisely in the opposite direction. The question is whether the President is willing to undertake the negotiation that a “new” democracy would require, because that would be the price of an integral fiscal reform.
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a quick-translation of this article can be found at www.luisrubio.mx