Mexico ruling party ready to back higher junk food tax: lawmaker

MEXICO CITY Wed Oct 23, 2013 3:35pm EDT

Mexico's President Enrique Pena Nieto speaks during a welcome ceremony for Ireland's President Michael D. Higgins at the National Palace in Mexico City October 21, 2013. REUTERS/Edgard Garrido

Mexico's President Enrique Pena Nieto speaks during a welcome ceremony for Ireland's President Michael D. Higgins at the National Palace in Mexico City October 21, 2013.

Credit: Reuters/Edgard Garrido

MEXICO CITY (Reuters) - Mexico's ruling Institutional Revolutionary Party (PRI) is ready to support an opposition proposal to increase a planned tax on junk food, the party's leader in the Senate said on Wednesday.

Last week, the lower house of Congress approved a planned fiscal reform containing a measure to impose a 5 percent tax on junk food, and the Senate is expected to approve the reform by the end of the month.

Earlier this week Armando Rios Piter, a finance expert from the leftist Party of the Democratic Revolution (PRD) in the Senate, proposed increasing the rate on the junk food tax to 8 percent.

Asked whether the PRI could back a higher junk food tax, which also aims to reduce high levels of obesity in Mexico, the party's Senate leader Emilio Gamboa told Reuters: "The PRI will undoubtedly support it."

He noted that the finance committee of the Senate still had to approve the fiscal bill, which is a key plank of a wider reform agenda spanning energy to telecommunications that President Enrique Pena Nieto hopes will boost growth in Latin America's No.2 economy.

Rios Piter estimates that an 8 percent tax would bring in 5.6 billion pesos ($431.90 million) in revenue, versus around 3.5 billion pesos under a 5 percent rate.

The PRI lacks a majority in Congress but a measure backed by at least part of the PRD is likely to pass the Senate. Any changes to the fiscal reform would mean sending it back to the lower house to be signed off again.

Lawmakers also rolled back plans to apply sales tax to rents, mortgages, property sales and school fees, while raising the top income tax rate on a sliding scale to 35 percent from 30 percent.

However, a key part of the planned tax overhaul could come under pressure as it goes through the Senate, after a top lawmaker on Monday said plans to raise sales tax in border states should be rejected.

Miguel Barbosa, Senate leader of the leftist opposition PRD, called for a vote against the government plan to raise the 11 percent value-added tax rate for border states to match the national rate of 16 percent.

The lower house left that part of the bill unchanged.

The tax bill is tied to the 2014 budget, which must be signed off on by mid-November.

(Editing by Simon Gardner; editing by Jackie Frank)

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