To avoid poverty in old age, key parameters such as retirement age must be adjusted, and the opportunities to withdraw funds saved in the Afores before retirement should be reduced, recommends the Task Force for Tax Transition.
It also suggests bringing together all the existing public retirement savings systems in a single comprehensive public system, which in turn is integrated into a Social Security System to be gradually built.
Enrique Díaz-Infante Chapa, director of the Financial and Social Security Sector of the Espinosa Yglesias Studies Center (CEEY), explained in an interview that eight civil society organizations and eight legislators from different parties participate in said Group, who prepared several documents among the which highlights the Reform of the Universal Pension System, which underlines that it is urgent to address the challenge of the financial unsustainability of the pension system, the reduced coverage and low replacement rates.
The text, he said, issues a series of recommendations to legislators with a view that they be considered to reform the pension system, among which it stands out that to increase coverage a mandatory scheme must be introduced for employees and self-employed to contribute for their retirement and can receive the retirement benefit.
Díaz-Infante, who participates in the working group, explained that representatives from the Center for Economic and Budgetary Research (CIEP), from Coneval, from the Mexican Institute for Competitiveness, from Oxfam, from Fundar, from the Friedrich Ebert Foundation, also collaborate. the Center for Public Finance Studies (CEFP), Cepal, and the Superior Audit of the Federation, among others.
He said that for a more equitable society, social security coverage should be provided to all Mexicans and that costs, as estimated three years ago, 2.4 percent of GDP, but the figure must be updated.
“Our proposal is that this be financed by a generalized VAT of 16 percent on food and medicines, which would imply eliminating the zero rate,” he stressed.
He said that among the proposals they have made is to provide a minimum pension for all Mexicans, regardless of whether they work in the formality or informality, which would be complemented with a pension from the Afore, for whoever had it and also that everyone had access to the health system.
He warned that “the fiscal space for Q4 is running out and they have to look for recurring sources of income, since it is not possible to continue financing pension spending with oil income, so they must define where they will get the resources from” .
The Working Group for the Tax Transition will deliver this month to the Political Coordination Board of the Chamber of Deputies a series of proposals in which they suggest reforms to reverse deficiencies in the health and education system, but also to “deactivate the bomb of time of the pension system ”, affirmed the deputy Alfonso Ramírez Cuellar.
The coordinator of this working group stated in an interview that the pension system demands around 1.2 billion pesos; all VAT collection goes to finance it and they are also expenses that increase year after year, so it is important that all expenses, both for contributory and non-contributory pensions, have sustainability.
“As we are going and with demographic changes it becomes a ‘time bomb’, because in terms of social spending, what takes most are retirements and pensions, it is the item that has grown the most since 2009,” he stressed.
The Working Group drew up 5 documents: that of spending requirements, health, education, the care system, and the proposal for the CEFP to become the Institute of Studies for Public Finance. Ramírez Cuellar said that the texts will remain as a work input for the next legislature.
“For us the priority is the health system, there must be a complete revolution that raises effective coverage, that guarantees free medicines, and above all, special third-level care,” he stressed.
He stressed that the deficiencies that increased due to the pandemic require this complete revolution and the provision of greater resources.