Mexico lawmakers back tax on junk food, pet treats

Mexico's lower house has approved a disputed fiscal reform plan that includes taxes on sugary drinks, junk food and pet treats to boost government revenue in Latin America's second economy. President Enrique Pena Nieto has pushed the legislation, which would also raise taxes on higher earners, to improve the country's lackluster tax collection, one of the lowest in the region. But soft drink firms and other businesses have criticized the proposed taxes as bad for the economy, taking out advertisements in newspapers to oppose the legislation. The chamber of deputies approved the general outline of the bill 317-164 late Thursday and voted on the details early Friday. It now goes to the Senate. The reform was backed by Pena Nieto's Institutional Revolutionary Party (PRI) and the leftist Democratic Revolution Party (PRD). The conservative National Action Party (PAN) opposed it. The legislation includes levies aimed at reducing obesity in Mexico, which rivals the United States for the dubious title of world's fattest nation, with 71 percent of the population overweight. Pena Nieto wants Mexicans to pay an extra peso (almost eight US cents) for every liter of sweetened drink in a country that guzzles more sodas than any other. Soft drink makers have dubbed the levy the "Bloomberg tax," naming it after New York Mayor Michael Bloomberg, whose plan to ban giant soft drinks from restaurants in his city was rejected by an appeals court in July. The lawmakers also passed a tax on high-calorie junk food that was not in Pena Nieto's reform plan. It would impose a five percent sales tax on foods with at least 275 kilocalories per 100 grams, including snacks, sweets, chocolate, flan, peanut butter and ice cream. The legislation will also increase the sales tax in border cities from 11 percent to 16 percent, on par with the rest of the country, raising concerns among businesses dependent on economic ties with the neighboring United States. The sales tax would apply to processed foods for dogs, cats and other pets as well as chewing gum. The reform would also increase income taxes, with a top rate of 35 percent for those who earn more than $234,000 a year. Taxes in Mexico are equivalent to 13.7 percent of the gross domestic product, compared to an average 18.4 percent in the rest of Latin America, according to the government.