Mexico prepares to impose junk food tax

Mexico prepares to impose junk food tax

The Mexican government has moved a step closer to introducing a tax on junk food with the country's Lower House of Congress approving a raft of measures aimed at raising tax revenues.

The Mexican Lower House approved details of a financial package on Friday (18 October) designed to boost the country's tax receipts by nearly 3% of gross domestic product by 2018. The government said the reform plan would raise Mexico's tax income by about 1% of GDP in 2014 and 2.8% of GDP by 2018.

Among the proposals are an increase in taxation levels for the country's highest earners and a 5% tax on junk food.

According to the legislation, high-calorie foods are defined as "those providing 275 calories or more per 100 grams". They will be taxed at 5% of the ticketed price, while chewing gum will be taxed at 16% and soft drinks will be taxed one pesto per litre.

"The reform of the Federal Budget and Fiscal Responsibility Law strengthens macroeconomic stability, grants credibility and transparency to the evolution of expenditure and public finances in our country, and establishes fiscal discipline as a state policy," the Lower House said.

Additional tax revenue will be used to lower the 2014-16 deficit, the government said. In addition to raising tax revenue, the legislation imposes an expenditure cap for 2015 and 2016 of 2.5% annual growth in real terms.

The proposals will now pass to Mexico's Senate.