Tags: Mexico | mexico | fiscal | reform | senate

Mexico Senate Passes Fiscal Reform; Includes Junk Food, Soda Taxes

Friday, 01 Nov 2013 04:18 AM

 

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MEXICO CITY — Mexico's Senate passed a vast fiscal reform on Thursday to increase the government's lackluster tax revenue through new levies on higher earners, junk food, and soda.

The reform was championed by President Enrique Pena Nieto to boost government coffers in order to invest in infrastructure and create a universal social security safety net.

But critics warn that the slew of taxes could threaten an economy that has already slowed down this year, with the government forecasting growth of 1.7 percent this year compared to 3.9 percent in 2012.

Following a night-long debate, the Senate sent the bill back to the chamber of deputies since it contained 14 changes to the provisions that passed the lower house this month.

One of the modifications was an eight percent tax on high-calorie foods, up from five percent approved by deputies as part of efforts to curb the country's obesity and diabetes epidemics.

The senators also approved a one peso (8 U.S. cents) surcharge per liter of sugary drinks, a measure backed by health advocates whose anti-obesity campaign is financed by the philanthropy organization of New York Mayor Mike Bloomberg.

The bill also increases the maximum income-tax rate from 30 percent to 35 percent for those earning three million pesos ($230,000) or more per year.

The reform was backed by Pena Nieto's centrist Institutional Revolutionary Party and some members of the leftist Democratic Revolution Party.

But the conservative National Action Party walked out of the debate after the Senate ended the reduced sales taxes enjoyed by states bordering the United States.

The conservatives fear that raising the tax at the border will harm assembly plants that make everything from candy to televisions and auto parts.

The government hopes the reform will increase revenue by 1.4 percent of gross domestic product next year.

Taxes in Mexico are equivalent to 13.7 percent of GDP, compared to an average 18.4 percent in the rest of Latin America, according to the government.

© AFP 2014

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