Tax collection and its importance for municipalities in México

Abstract

Treasury federalism refers to the distribution of public resources between the federation, the states and the municipalities. Since 1998, the Federal Contributions Fund or Ramo 33 has been established, which aims to strengthen the states and municipalities, but which undermines the financial autonomy of local governments, mainly municipalities. Local governments also receive resources from the so-called Federal Units, or Ramo 28, which are delivered to the states to compensate them for their economic contribution to the nation. Fiscal federalism consists of the distribution of taxation powers between the federation, the states and the municipalities. Although the constitution establishes the system of concurrent competences in the matter, laws and agreements transfer most of the fiscal attributions to the federal government. Another source of resources of the municipalities, and which is also exclusive, which indicates a great potential as a source of own income, is the property tax, whose constitutional foundation is found in Article 115. However, Mexico is one of the countries of the Organization for Economic Cooperation and Development (OECD) with a lower level of sub-national revenue, the average income of Mexican municipalities is only 10%.