World News

Mexican tax campaign threatens rule of law, international attorneys say

MEXICO CITY (Reuters) - An international lawyers’ group has said Mexico is violating international law with threats to criminally prosecute attorneys as part of a campaign to make companies settle tax disputes.

In a strongly worded letter handed to officials on Friday, several committees of the London-based International Bar Association said Mexico’s tax authority (SAT) and fiscal prosecutor’s office “openly threatened the rule of law” and was targeting the law firms and accountants who assist taxpayers.

Neither entity immediately responded to a request for comment on the letter, which was signed by Peter Bartlett, the vice chair of IBA’s Legal Practice Division.

Mexican President Andres Manuel Lopez Obrador has prioritized improving tax enforcement in the country with the lowest tax intake in the Organisation for Economic Co-operation and Development.

The SAT chief and tax prosecutor have both sent clear messages that tax dodgers, including major companies and their tax counsel, could face jail time if suspected of fraud. When asked if the approach could deter investment, they have said that companies would have nothing to fear if they followed the law.

Walmart Inc's Mexico unit WALMEX.MX and Coca-Cola bottler Femsa FEMSAUBD.MX have recently paid hundreds of millions of dollars after resolving tax disputes.

The IBA letter, which was dated Aug. 27 but delivered on Friday, described the strategy of pursuing lawyers and accountants as overreach, and called the threat of criminal prosecution “disturbing.”

“The existence of some bad apples that deserve prosecution is far from a position in which all taxpayers and the legal advisers who represent them are presumed to be criminals,” the letter said.

The association also expressed concern that authorities have warned taxpayers to not use their lawyers in settlement proceedings, but did not provide details.

“Suggesting that taxpayers should reach administrative agreements with the authorities without the representation of their legal advisers is not acceptable,” it added.

Reporting by Daina Beth Solomon; Editing by Aurora Ellis