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Taking on Goliaths requires many Davids, and a lot of time

Big governments and big business can seem daunting, but they are no match for persistence, dedication and knowledge of how things work.

01

Inequality on the Ground

Jojutla is a mid-sized town in Mexico’s southern Morelos state. The population of nearly 60,000 has traditionally relied primarily on tourism and agriculture. Crops are mostly sugarcane, rice—and opium poppies.

That means the verdant beauty is marred by drug trafficking and the violence associated with disputes between cartels, while the people are saddled with chronic poverty. Corruption is also a constant complaint, with some government authorities known to collude with organized crime groups.

Jojutla from the air—lovely, but struggling.

As a result, Jojutla and the southern area of ​​Morelos has ‘expelled’ young people to Mexico City, Cuernavaca and even the United States, where they find whatever work they can in the construction industry, in kitchens or doing garbage collection

Almost half of the one- and two-story structures, including 20 schools, were destroyed.
Buildings that remained standing were badly damaged: balconies were twisted from their moorings and gaping holes opened in the sides of homes.

Carlos in the remains of the old village hall.

Then, on September 19, 2017, conditions in Jojutla got a lot worse: A 7.1 earthquake—Mexico’s most devastating in three decades—killed at least 27 people and leveled large swathes of the town’s center.

That is when Carlos decided to return home to help. NGOs offering aid rushed in for immediate humanitarian needs, but reconstruction lagged. The municipality asked for a tax amnesty to free up funds, but its request was ignored. Residents protested with signs saying, “Money is not lacking. There are too many thieves.”

02

The Bigger Picture

There are many dynamics in Mexico and across Latin America that contribute to a lack of public spending for community services. One of them is a stream of billions of government monies into the coffers of large corporations and the pockets of wealthy individuals in the form of tax breaks and amnesties. While taxation can be a powerful engine of resource redistribution, exemption of (as well as evasion by) corporations and the wealthy is common. And when the wealthy don’t pay taxes, everyone else—like the residents of Jojutla—reaps the consequences.
IBP's Latin America Tax Expenditure Research, Advocacy and Learning (LATERAL) project and its civil society partners gathered in Lima, Peru to share findings of their research. Photo by Fundar.

In 2016, IBP convened nine leading civil society organizations in Latin America to discuss common challenges faced by their teams and the region,” recalls Paolo de Renzio, senior research fellow for IBP.

“The consensus was that taxation was the next frontier for civil society advocacy—a sector of public finance in which there was less information, less activism, less accountability than in budget transparency overall. There was only a basic awareness that tax systems are highly regressive and thus a big source of inequality. The groups knew there was a lot of public money involved, funds that weren’t being collected for a number of different reasons—including political interference and exchange of favors in very opaque ways. But more needed to be known before action could be taken.”
The 2016 convening led to IBP’s launch of the LATERAL (Latin America Tax Expenditure Research, Advocacy and Learning) project. Its goals are to 1) conduct research into the nature of tax expenditures in Latin America, 2) determine the impact of those practices on social inequality, and 3) launch advocacy campaigns to increase citizen awareness and engagement, while pushing or more just policies. One of the major participants is Fundar, a Mexico City-based civil society organization that has collaborated with, and received support from, IBP for more than 20 years.

03

Following the Money Trail

While low levels of tax income are a problem across Latin America, the challenge is particularly acute in Mexico, which collects significantly less revenue as a percentage of total GDP than the average in the region. The poor rate of revenue collection severely constrains the government’s ability to reduce inequality and provide necessary services. Meanwhile, it is difficult for outside observers to determine who benefits and to what extent, thus giving significant discretion to political actors to use tax amnesties for their own agendas.

In Mexico, many individuals and organizations, for various reasons, don’t pay their annual taxes on time. Thus, when a new presidential administration comes in every six years, one of its first actions is to boost revenue by enforcing payment. In return, the law allows applicants with an urgent need to ask that their debt payment be delayed or cancelled (in full or in part). In 2009, recounts Carlos Brown Solà, Fundar’s former fiscal justice program coordinator,

We got a tip from a [government] insider that some professional soccer clubs in Mexico had been granted massive tax amnesties. That's what got us to start pulling the strings to see what was happening.

Iván Benumea Gómez, investigator for Fundar’s fiscal justice program, continues the story: “Fundar filed a strategic litigation suit, but didn’t win that battle. The court decided in 2012 that tax secrecy is needed to protect individuals’ privacy. Of course, Fundar responded that in some cases, like when large amounts of taxes are not being paid by a few entities, releasing the information is in the public’s interest. But just the attempt to challenge the tax code was significant, because it was the first time a civil society organization made it a public issue.”

04

The Big Breakthrough

Iván joined Fundar in 2013 and was charged with figuring out what the organization could do to advance the investigation. A year later, due in part to pressure from Fundar and others, the tax code was modified to allow disclosure of tax forgiveness and amnesties. However, just how much was being forgiven was still a closely held secret, leading Fundar and its allies to focus on passage of new legislation, called the General Transparency Act.

Before the act passed, however, a break no one expected came. Iván was browsing through government reports one day and discovered a report prepared by the country’s supreme audit institution, documenting that a number of wealthy taxpayers had secured massive amnesties in 2013, and several had benefited during the previous round (2007) as well. The ramifications were huge: In 2013, the equivalent of 1% of Mexico’s GDP was forgiven—with half of the benefits going to just 46 taxpayers.

Ivan Benumea Gomez, investigator for IBP Mexico partner Fundar's fiscal justice program and Karla Tesillo, a lawyer who helped uncover US $44 billion in tax amnesties awarded to wealthy corporations and individuals in Mexico. Photo by Fundar.

In that moment, I fell in love with tax work,” laughs Iván, who had been toying with quitting the civil society sector to devote time to a rock band. “I thought music was cool and taxes were not. But suddenly, I could see that it would be possible to take on the likes of Citibank and [business magnate] Carlos Slim.”

Ivan Benumea Gomez, investigator for IBP Mexico partner Fundar's fiscal justice program. Photo by Fundar.
Iván and Karla spent hours poring through on- and offline documents.

Fundar launched a campaign to pressure the Servicio de Administración Tributaria (SAT, Mexico’s internal revenue service) to name the persons and legal entities who benefited between January 1, 2007, and May 4, 2015, as well as the amounts and justifications. Its request was denied.

The CSO appealed to the National Institute of Transparency, Access to Information and 

 Protection of Personal Data, which ruled against the SAT. Nevertheless, the agency didn’t budge. That’s when Fundar went back to court—but, by necessity, in Iván’s name. The legal tool used by Fundar is called an amparo, a citizen’s constitutional challenge that in most cases can be filed only by an individual.

I have to say that I did get a few challenging emails in my personal inbox. But I simply replied that I only wanted what the law said I could know and that other state entities said I should have.

05

What Success Looks Like

Fifteen months later, Iván won and SAT was forced to inform the corporations and individuals who had benefited from the amnesties that their information would be shared. Seventy beneficiaries then filed their own amparos challenging the victory—a number that soon became 100 and then 201. The release of the tax-amnesty data was delayed.

“These companies were trying to protect their status, pure and simple,” explains Iván. “Our work became all about defending against them. We actually had to hire another lawyer to help me with the cases.”

Meanwhile, Fundar and its allies received a powerful boost from Mexican President Andrés Manuel López Obrador. Previous administrations were known for their corruption and Obrador seized on the tax dispute as an opportunity to differentiate himself from his opponents.

During one of his morning press conferences, Obrador announced a moratorium on tax amnesties until the investigation was complete.

Having the president talk about your campaign during his daily press conference is the best way to get all the newspapers to run at least one article on the issue,” smiles Carlos Brown Solà. “The biggest newspaper in Mexico, Reforma, leaked the names of the companies we were litigating against. All of the big financial services were there, from Bank of America to Citigroup.”

Fundar will reap the benefits for a long time. “This case has attracted more public exposure for Fundar than anything else in the 20 years since our founding,” reflects Iván. “And now we have very direct contact with a lot of journalists.”
By fall of 2019—more than 10 years after that first whistleblower raised the red flag—most of the amparos had been resolved in Fundar’s favor and the organization was cleared to go public.

From 2002 to 2017

Any citizen of the country can see for themselves who is getting these big tax write-offs, on a special site built by Fundar.

Note that these totals do not yet include the 201 persons or entities that have filed challenges. They represent another 273.7 billion pesos in 2019 values.

An array of government officials spoke at the press conference, eager to go on record.
Haydeé Pérez Garrido

A press conference was called, with representatives of all the big players present—even the SAT.

“The people have the right to know the reasons why the government is granting tax remittances or forgiveness, because only in this way can we ensure we are all being treated in the same way, based on the same criteria,” Haydeé Pérez Garrido, Fundar’s executive director, told the packed room. “Mexico has experienced a crisis of corruption and systematic impunity, causing the public to lose confidence in our public institutions. We firmly believe at Fundar that open information and accountability for government action allow citizens to regain the trust the Mexican state so dearly needs.”

Joel Salas Suárez, commissioner of the National Institute for Transparency, Access to Information and Protection of Personal Data, publicly praised Fundar for its service. “I believe Fundar’s effort is a great example for Mexican society of the importance and usefulness of fully implementing the goal of access to information. Being better informed about whose debt was forgiven is to know why at a certain moment in time the Mexican government did not collect billions of pesos. Revenue that is not collected, that’s money that is not going to hospitals, it’s money that is not going to schools, it’s money that is not being invested in infrastructure.”

Carlos Brito adds, “That’s money not going to Jojutla for reconstruction.” Today, he sits on the Jojutla City Council and can work to assure his town gets its fair share of government money.

Is it right that 50% of the Mexican population live in poverty and has access to only 3.5 pesos out of 100? Our tax system is being used to give more benefits to the people and companies that have the most.

Now, however, Carlos has hope that might eventually change. The national legislative cycle started in September, and tax amnesties were named one of the top three priorities for the entire year. Meanwhile, Obrador has proposed a constitutional amendment prohibiting the forgiveness of the debts of large taxpayers and sent it to the legislature.

But, as both Carlos Brito and Carlos Brown Solà point out, the real priority is broader than taxes, it’s economic justice. And the lessons learned from

the work that Fundar did to help achieve that now can be shared, through LATERAL, with other countries throughout the region.

“There’s a really important lesson here for all advocates,” notes Fundar’s Haydee. “This win took more than 10 years and a lot of different players. But it paid off. We have to be in this work for the long haul.”

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