Top Lawyer Group Says Mexico Tax Crackdown Is Going Too Far
Top Lawyer Group Says Mexico Tax Crackdown Is Going Too Far
(Bloomberg) -- An international legal organization told Mexico’s Finance Ministry in a letter that the country’s hardball tactics to fight tax evasion are threatening the rule of law, in another chapter of the increasingly frosty relationship between the government and the business community.
Peter Bartlett, vice chair of the International Bar Association’s legal practice division, said in a letter sent to Finance Minister Arturo Herrera that the organization had received “very disturbing” reports that taxpayers were being warned not to consult with lawyers in tax disputes. Moreover, taxpayers are facing threats of criminal fraud charges if they fail to reach deals with the authorities, according to the missive sent by the London-based IBA.
Mexico’s Finance Ministry didn’t respond to a request for comment.
While most countries have been offering tax breaks as the coronavirus pandemic wrecked their economies, Mexico has been pushing large firms to settle disputes as a way of balancing the budget. The country has raked in more than $1 billion in revenue from settlements this year and President Andres Manuel Lopez Obrador’s government will have even greater powers to pursue tax fraud charges going forward after recent reforms.
Mexico’s tax officials have blamed a cabal of legal firms for convincing companies to use what they describe as illegal tax planning strategies. The government’s tough approach has shocked business, with some representatives calling the crackdown “fiscal terrorism.”
IBA, a top organization gathering lawyers, bar associations and law societies around the world, said in the letter dated Aug. 27 that, on top of taxpayer intimidation, legal experts themselves were facing threats of criminal prosecution that “violated lawyer independence and the law.
While the government should pursue cases against any lawyers who broke the law, it can’t treat taxpayers and their advisers as if they were all criminals, the IBA said in the letter.
“Suggesting that taxpayers should settle administrative procedures with the authorities without the representation of their legal advisers is unacceptable and it cannot be ignored,” Bartlett wrote.
Deputy Finance Minister Gabriel Yorio told Bloomberg News in an interview last week that the tax settlements were helping the government project a slight primary surplus this year. Just this month, BBVA Bancomer agreed to pay 3.2 billion pesos ($150 million), and Walmart de Mexico SAB coughed up 8.1 billion pesos earlier in the year after tax settlements.
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