Mexican President addresses tax question

At a gala dinner in Toronto honouring Felipe Calderon, the president of Mexico fielded questions on everything from his administration’s war on drugs to whether the soccer-crazy nation is likely to win the 2010 FIFA World Cup.

But with nearly half the evening’s sponsors being gold mining companies, one of the first questions from the floor was whether Mexico had any intention of imposing more taxes on the industry along the lines of the Resource Super Profits Tax, recently proposed in Australia.

Calderon’s response seemed to leave more questions than answers, however. While he said Mexico wants to encourage and facilitate foreign investment, he noted the country already has a very competitive tax regime and joked that people shouldn’t give him any ideas.

“Well, we have to look around the world,” he said. “It’s one of the most profitable businesses. But we want to attract as many foreign investors as possible. My purpose is not to impose more taxes. Mexico is very competitive in the world to say the least. Don’t provide any new ideas on this.”

The president was more specific, however, when it came to the Value-Added Tax (VAT) and improving the lengthy wait times companies typically face to get refunds. (Some companies complain it can take several years.) “It’s a problem we’re trying to fix,” Calderon said. “We know our tax system is too complex. We are battling against red tape in the government.”

Calderon noted that one of the things his administration is trying to do is make sure that “investors don’t face more problems,” adding that one of his reforms is to bring in rules “to establish certainty about investment in Mexico.”

While he battles red tape in government, however, the biggest battle Calderon faces is the war on drugs and he addressed the conflict in great detail.

Calderon asserted that previous governments had avoided dealing with the issue but that his administration was tackling it head on. “It’s a serious problem but we are confronting it. We are facing it. It will be a long process.”

He also pointed out that 90% of the drug-related violence in Mexico was between rival drug cartels fighting each other to preserve territory.

While he said his government was strong enough to fight criminals at home, he pointed out that the biggest market for drugs was the United States, and that it was a global problem.

“What about Honduras? What about Somalia? What is happening in Jamaica? The problem is international.”

He also maintained that in terms of annual homicides, Mexico’s statistics aren’t quite as bad as people might think. Mexico has 12 homicides per 100,000 people a year compared with Brazil’s 23 per 100,000 and Washington D.C.’s 31 per 100,000, he said.

Sponsors of the dinner hosted by the Canadian International Council, included US Gold (UXG-T, UXG-X), Gammon Gold (GAM-T, GRS-N), Agnico-Eagle Mines (AEM-T, AEM-N), Goldcorp (G-T, GG-N) and Barrick Gold (ABX-T, ABX-N).