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In Mexican Town, Only Certainty Is Death
Residents Exempt From All Taxes In Quirk of History

By Mary Jordan
Washington Post Foreign Service
Monday, September 25, 2000; Page A14

SAN FRANCISCO MAGU, Mexico—This pretty town in the hills needed running water, so Pablo Pimentel fell in alongside other men, women and children swinging pickaxes and shovels to carve out a ditch for water pipes.

"You get things done faster and get what you need if you do it yourself," Pimentel said, driving his shovel into the hard brown earth. "That is far better than paying taxes."

That sentiment is more than a complaint: It's public policy in this unusual village of 10,000 people, which by an accident of history has been exempted from all sales, income, property and other taxes for the last 260 years.

"Life without taxes is glorious," said Adoracion Ortega, a maid.

No one is sure exactly how a favor from Mexico's Spanish colonial rulers in the 18th century has translated into tax-free status in the 21st. But somehow San Francisco Magu has become a living emblem--albeit an extreme one--of Mexicans' uncomfortable relationship with the whole idea of taxation.

Mexico collects less revenue from taxes than any of the world's 29 richest countries--and by a mile. The average country depends on taxes for nearly 38 percent of its gross domestic product; the United States gets 28 percent, and Mexico gets only 16 percent. Tax evasion in Mexico is easy and routine, and everyone from chewing gum vendors to the country's richest business leaders finds ways to pay practically nothing to the government.

"You might say in Mexico that the only two sure things are death, and the possibility of not paying taxes," said former presidential spokesman Antonio Ocaranza, putting a Mexican twist on the adage.

While taxes are hardly popular anywhere, Mexico has a well-developed culture of nonpayment; an estimated one-third of the economy is classified as "informal" or off the books. That means millions of workers--by some estimates half of all workers-- pay no income taxes at all.

Because of widespread corruption during 71 years of one-party rule and numerous scandals involving officials who swiped spectacular sums from the public kitty, many people say paying taxes to the government amounts to handing cash to a thief.

Because of their distrust of the government, many Mexicans don't see any relationship between paying taxes and receiving services. Taxes seem like an unfair intrusion, like asking them to throw their money away. Mexicans don't just evade taxes, they reject them.

That culture is embodied most fiercely in this town, which is a mere 26 miles north of Mexico City, but can only be reached by a bumpy, two-hour drive along winding, hilly roads. This village of farmers tending cows, corn and beans takes its unique status extremely seriously. Over the years, the threat of violent conflict has halted occasional attempts by local government officials to give up the town's tax-exempt tradition.

"We will never pay," said Francisco Segundo Casimiro, a formidable mountain of a farmer who comes from a long line of tax-exempt residents. "That is our right according to history and tradition. I imagine any attempt to change that would cause people to react with anger."

Distrust of government, and the aversion to the taxes it creates, is a major obstacle to the incoming administration of President-elect Vicente Fox. He has promised better schools, roads and other public improvements to lift the Mexican economy.

In a recent interview, Fox said tax reform is the most unpopular item on his agenda after he takes office Dec. 1. He said the government needs money to pay for programs for the poor and to create jobs to slow immigration to the United States. He said that will not be easy in a "country where the government has failed to respond to people paying taxes."

Shortly after his election, Fox found out just how dangerous the t-word can be in Mexico. After one of his aides floated the idea of taxing food and medicine, Fox was lambasted in the media as well as some members of his own party and had to disavow the idea immediately.

Instead, Fox has set his sights not on increasing taxes, but reducing the number of evaders. One of his top economic advisers said that if Fox could just collect the taxes the government is owed, the revenue would total as much as $10 billion a year.

Still, that may be like trying to make it snow in Acapulco.

There are too many people like Adoracion Ortega, who has never paid taxes, even before she moved to Magu. "My husband never registered his job, so he never had to pay taxes," she said bluntly, able to say publicly what others say privately because she is now a resident of Magu.

People in Magu say they have a colonial-era document to prove that in 1740, Viceroy Juan Antonio de Vizarron granted them tax-free status in gratitude for the townspeople's hospitality when he was on the run from Spanish soldiers, who had accused him of treason.

But no one--at least no one from outside the town--has seen any such document in the last, say, 260 years.

Gilberto Vargas Arana, the region's chief archivist, has never seen it, either. He said that during his years of investigating this unusual case, many of the town's old-timers insisted to him that they have the document safely stored and that it is too valuable to show publicly.

Vargas said that even if the document did not exist, oral tradition can be as important as any piece of paper, and Magu has a no-tax tradition handed down through the ages. Not to mention the fact that two presidents--Benito Juarez in 1871 and Luis Echeverria in 1971--officially endorsed Magu's status.

Magu is so discreet about its good fortune that many people in surrounding towns don't know about it.

But word is leaking out, and more people and businesses are trying to move to Magu. The 1995 census showed 6,000 people in the town, but Mayor Gabino Jasso said there now are about 10,000 residents.

Jasso, who heads a 10-town municipality--the equivalent of a county--that includes Magu, said the village's assembly guards its property closely and does not make it easy for people to move in.

He said that until three years ago, Magu had no electricity, no library, no secondary school and no paved road. All that has changed, as the municipality as a whole decided to pay for these services despite Magu's nonpayment of taxes.

Jasso hopes these changes will make people see that their taxes can bring rewards. He said his plan is to slowly encourage Magu resident to pay taxes, perhaps placing a tax collection box in the town and matching peso for peso any money residents contribute.

But many people in Magu, like Pimentel, won't be rushing to the collection box.

"I'd rather dig my own ditches," he said. "Definitely, if we paid taxes, the politicians will just steal it."

© Copyright 2000 The Washington Post Company

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