Mexicans blindsided with new food tax

If you fetch a quick quesadilla or hot dog in Mexico, expect to pay more very soon. Beginning July 1, the 16 percent value-added tax (VAT) will be added to popular prepared foods sold in supermarkets and convenience stores. The new federal tax will cover a variety of foods consumed by busy Mexicans who find less and less time to cook at home, including tortas, tamales, sandwiches, flautas, tacos, hot dogs, roasted chickens, and much more.

Food prepared and sold in restaurants has long been subject to the 16 percent VAT, but until now similar foods offered at commercial outlets for take-out consumption have been exempt from the tax. Unprepared foods remain VAT-free-at least for now.

Talk of taxing food and medicine after the administration of President Enrique Pena Nieto took office in late 2012 caused a popular uproar and prompted pledges by the new president’s administration that it would not tax the essential items.

During the mid-term Congressional and state/local elections campaigns that concluded earlier this month, the possibility of a new food tax was not on the political agenda. But shortly after the June 7 elections, the Tax Administration Service quietly added the VAT to prepared foods outside restaurants as part of a set of new resolutions published by the federal agency and set to go into effect on July 1.

The pending tax will increase costs for Mexican consumers who’ve been hit hard with price hikes on many different food products, both prepared and unprepared, in recent years. For instance, a study done by the pro-consumer El Barzon organization found that a kilo of eggs soared from 14 pesos in March 2012 to 40 pesos by the spring of 2015; the price of chicken breast leaped from 25 pesos to 70 pesos in the same time frame. According to El Barzon, the minimum wage rose only 10.7 percent during the three years in question.

For the first two weeks of June, consumer prices rose another 0.13 percent, the biggest increase in the same period since 2012, as measured by the National Institute of Statistics, Geography and Informatics. According to the federal government’s official statistics agency, the price of tomato was up by 11.05 percent. The following commodities also registered price hikes: pork (1.61 percent), beef (0.38 percent) and sweet bread (1.56 percent). Consumers, however, found some relief with decreases for chicken (0.84 percent), grapes (10.63 percent) and potatoes (2.67 percent).

Initial public reactions to a new food tax that is regressive in character were overwhelmingly negative, with some people saying it would affect their eating habits and family income. Faced with declining prices for its budgetary mainstay of oil, the Mexican government is under pressure to find new sources of tax revenue. But one result of the new tax could be a surge in food purchases from street and informal vendors who typically don’t pay VAT taxes.

Sources: El Diario de Juarez/El Financiero, June 23, 2015., June 23, 2015. La Jornada, April 6, 2015; June 24, 2015. Articles by Julio Reyna Quiroz, Juan Antonio Zuniga M. and editorial staff.

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