Underground economy in Mexico fueled by red tape

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The prices of fruits are displayed in a market in Mexico City, Mexico, February 22, 2018. REUTERS/Edgard Garrido

MEXICO CITY (Xinhua) – Complex and numerous regulations are to blame for the size of Mexico’s underground economy, an economic think tank said on Sunday.

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The country’s complicated tax laws lead to high rates of tax evasion and informal employment, the Private Sector Centre for Economic Studies (CEESP) said in its weekly report.

“One important factor that spurs informality is the existence of an excessive regulatory framework,” said the centre, which belongs to the Business Coordinating Council (CCE), Mexico’s largest business confederation.

However, it acknowledged that “significant goals have been achieved in reducing tax evasion.”

Entrepreneurs aspiring for a productive business and more jobs face many requirements, the centre said, calling for “an improvement in the regulatory environment and clear rules of the game so investors see our country as an attractive destination for productive investment.”

Earlier this the week, the National Statistics and Geography Institute (Inegi) said in its report that Mexico’s underground economy accounted for 22.7 percent of gross domestic product (GDP) in 2017.

The figure is slightly higher than the 22.6 percent of GDP registered in 2016, but lower than the 22.8 percent in 2015, according to Inegi.

Mexico, Latin America’s second-largest economy after Brazil, saw a 2.1-percent expansion in GDP in 2017.

The International Monetary Fund said in November Mexico’s economy is projected to grow at 2.1 percent this year.

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