Latinnews Daily - 21 August 2003

President Vicente Fox flew in the face of all expert opinion and called for the taxation of the informal economy. The Mexican tax office, which has looked long and hard at ways of taxing the informal economy, concluded that it would not be worth the effort. It reckons that setting up and running the system would cost more than the likely revenues.  

The government estimates that there are 15.8m people working in small businesses which often do at least some of their business in the informal economy. There are another 11m people fully in the informal economy. What is clear is that the informal sector is the only part of the economy which is moving: around 9 of every 10 jobs created in the first half of the year were in the informal sector.

The main economic problems posed by the growth of the informal sector are that its workers do not get state pensions. Another is that people working in the informal sector use public services but make no contribution towards the cost. The third problem is that the boom in the informal sector undermines the rule of law: legal businesses complain that the informal ones undercut them.

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