MEXICO CITY (Reuters) - Mexico’s finance minister on Thursday labeled the U.S. tax law overhaul passed by Congress in December as “regressive” and said the Mexican economy would remain competitive without sweeping cuts to corporate tax rates.
The Republican-controlled U.S. Congress defied opposition from Democrats to pass the bill and give President Trump his first major legislative victory.
The overhaul cuts taxes for corporations and the wealthy while giving mixed, temporary tax relief to middle-class Americans.
Cutting the U.S. corporate tax rate to 21 percent from 35 percent has sparked concern among Mexican companies and some lawmakers that it could lead to less investment reaching Latin America’s second biggest economy.
However, Finance Minister Jose Antonio Gonzalez Anaya argued the changes could make the U.S. economy overheat and said his government did not want to copy Trump’s overhaul.
“It’s a very regressive reform: the top one percent of earners will get 40 percent of the benefits,” he said at an event in Mexico City. “It’s not exactly something we want here.”
What makes a country competitive is not simply a matter of taxation, said Gonzalez Anaya.
“If that were the case the countries with the lowest tax take would be the most competitive,” he said, citing Haiti and Bolivia as examples in the Americas. “They aren’t exactly the most competitive countries in the hemisphere.”
Still, automaker Fiat Chrysler said shortly after Gonzalez Anaya spoke that the U.S. tax overhaul had partially enabled the company to boost investment in its U.S. manufacturing operations and grant a bonus payment to workers. [L4N1P65G4]
The minister said that since the United States is near full employment the overhaul’s impact on economic activity would be “limited”. It could, however, make it overheat, he added.
“That would force the Federal Reserve to act more quickly than it’s been doing up until now,” he said.
Editing by Dave Graham