Mexico contemplates new sin taxes

Dan Grech Dec 12, 2006


SCOTT JAGOW: Mexico really counts on other countries buying its oil. That money makes up 40 percent of Mexico’s budget. But the oil ATM is starting to run dry. Production at Mexico’s main oil field is way down and so the country’s looking for new ways to make cash. Dan Grech reports from the America’s Desk at WLRN.

DAN GRECH: With oil revenue on the decline, Mexico’s treasury is parched. So the country’s considering a tax on another liquid: Soda.

Mexico’s new president, Felipe Calderon, wants to tax soft drinks 5 percent. He also proposed a 15 percent tax on cigarettes. The combination is expected to raise a billion dollars.

Jerry Haar with Florida International University says the president’s proposal is giving Mexicans indigestion. The average Mexican drinks three liters of soda a week.

JERRY HAAR: The VAT, or the Value Added Tax, and this so-called sin tax that President Calderon is contemplating, hurt the poor most because disproportionately they consume the largest amount of cigarettes and soft drinks.

These taxes could consume jobs. Critics say the tax would put tens of thousands of sugar-cane harvesters and mom-and-pop vendors out of work.

A vote will come before Christmas.

I’m Dan Grech for Marketplace.

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