Business leaders in León, Mexico, many from the leather and footwear sectors, have met federal government representatives to complain about a proposed tax reform.

The business community told government representative Ector Ramírez that plans to introduce a single business tax payment would not work, claiming that the government’s failure to take into account labour costs would lead to the loss of jobs. The proposal is to charge businesses a flat tax rate of 16% in 2008, rising to 19% the following year. The Mexican government has calculated that this move will allow it to raise an extra $12 billion in the first year, and $16.5 billion extra in 2009.

Industry leaders told Mr Ramírez that the plan would not work and that the government should lower the single tax rate to 12%, that it should remove income tax and take into account social security payments that employers make on behalf of employees.

Mr Ramírez hinted that the federal government was considering further reform and acknowledged that it was important to take the particular needs of the footwear and leather sectors into account.