The logo of the Mexican state oil firm PEMEX is pictured during a protest against Senator Samuel Garcia's proposal to close down the Cadereyta refinery as a measure to lower the levels of pollution in the air, in Cadereyta
FILE PHOTO: The logo of the Mexican state oil firm PEMEX is pictured during a protest against Senator Samuel Garcia’s proposal to close down the Cadereyta refinery as a measure to lower the levels of pollution in the air, in Cadereyta on the outskirts of Monterrey, Mexico August 6, 2020. REUTERS/Daniel Becerril

December 9, 2020

By Stefanie Eschenbacher and Abraham Gonzalez

MEXICO CITY (Reuters) – Mexico’s government is weighing making further reductions to the tax burden on national oil company Petroleos Mexicanos (Pemex) to bring it closer to that of ordinary corporations, a top finance ministry official said on Wednesday.

Lower taxes could mark a turning point for ailing Pemex, the country’s largest company and tax payer.

Pemex has been struggling for years to shoulder its crushing tax burden and what both investors and officials consider unsustainable levels of debt.

“Changing the tax burden is a structural change that Pemex needs, but we have to do it gradually,” Deputy Finance Minister Gabriel Yorio told Reuters in an interview.

President Andres Manuel Lopez Obrador has made reviving Pemex a top priority, but the company has been hammered by years of losses, and in April ratings agencies stripped it of its investment grade credit rating.

Yorio argued the changes should occur between 2021 and 2024 so that Pemex “can start paying taxes like other corporations in Mexico.” But he said no decision has yet been made.

“We’ll have to see how much of this our public finances can absorb,” Yorio added, arguing that with tax evasion in Mexico worth around 3% of GDP, there is currently limited scope.

Past governments have also acknowledged that Pemex’s tax burden is excessive and should be lowered.

The shared utility tax, the oil company’s largest single payment toward the government, was reduced from 65% to 58% this year and Yorio said it could be at 54% next year.

Pemex had also received other financial support, he added.

“Pemex has two great structural problems with its cash flow: its debt burden and its tax burden,” Yorio said. “Right now, it seems in 2021 we’ll keep (the shared utility tax) at 54%.”

(Reporting by Stefanie Eschenbacher and Abraham Gonzalez in Mexico City; Additional reporting by Ana Isabel Martinez and Adriana Barrera in Mexico City; Editing by Dave Graham and Matthew Lewis)

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