Tobacco Giants Blast Talk of Hiking Mexico Cigarette Taxes

Source from:  Investors 10/20/2010

Philip Morris International and British American Tobacco took out ads in leading Mexican newspapers on Monday to denounce congressional proposals to further boost taxes on cigarettes. The complaint was spurred by a move supported by five of the six parties with seats in Mexico's Congress to accelerate increases in cigarette taxes that were originally meant to be phased-in over the next three years. The initiative, which comes in the form of a bill to amend recent tax legislation, is opposed by the Institutional Revolutionary Party, or PRI, which has pluralities in both the Senate and lower house. Sponsors say the bill is aimed at curbing smoking. At the current rate, according to PMI and BAT, Mexico's tobacco tax accounts for more than half of what consumers pay for a pack of cigarettes. The companies said the Mexican tobacco industry directly employs some 5,000 people and that it generates more than 30,000 additional jobs in the countryside. Revenue from cigarette taxes already amounts to roughly 13 billion pesos ($1 billion) annually, 44 percent of what the Mexican government collects from targeted levies, PMI and BAT said. "This scheme gives our industry, for the first time, the conditions necessary to develop long-term investment and growth plans for the entire chain of production," the firms said of existing Mexican legislation. Rather than discouraging cigarette consumption or raising revenue, "sudden increases in taxes" only promote a black market, the tobacco giants said. Enditem