Background on Canacintra and its Relevance
The National Chamber of the Transformation Industry (Canacintra) is a prominent organization representing Mexican manufacturing businesses. As an influential voice in the industry, Canacintra’s warnings carry significant weight regarding potential impacts on the tobacco sector and related policies.
Canacintra’s Concerns on IEPS Increase
Canacintra has expressed concerns that raising the Impuesto Especial sobre Producción y Servicios (IEPS) on tobacco will lead to an increase in the “black market” for cigarettes and higher youth smoking rates, negatively affecting companies’ investments.
Proposed IEPS Hike Details
The proposed increase in the IEPS translates to an additional 20 pesos per cigarette pack, which Canacintra argues will not decrease tobacco consumption among the population.
Black Market and Fiscal Loss
María de Lourdes Medina, Canacintra’s president, stated that the black market already accounts for over 20% of total cigarette consumption in Mexico, resulting in a fiscal loss between 13,000 and 15,000 million pesos annually.
She emphasized that higher taxes on tobacco do not reduce consumption but instead push the market towards illicit channels, creating an unregulated sector that facilitates underage smoking.
Historical Context and Policy Recommendations
Canacintra argues that combating tobacco use should focus on long-term health policies and information campaigns rather than fiscal measures. They cite historical evidence in Mexico, where increased taxes on tobacco have led to a thriving black market and failed to reduce smoking rates.
In 2010, a 7-peso increase per pack was implemented to boost revenue, but it only resulted in an additional 30,000 million pesos for the government while illicit cigarette sales surged to 20% of the national market, and underage smoking remained unchanged.
Key Questions and Answers
- What is Canacintra’s main concern regarding the proposed IEPS increase? Canacintra warns that raising the IEPS on tobacco will boost the black market for cigarettes and increase youth smoking rates, negatively impacting companies’ investments.
- What percentage of cigarette consumption is attributed to the black market in Mexico? The black market already accounts for more than 20% of total cigarette consumption in Mexico.
- How much fiscal loss does the black market cause annually in Mexico? The black market results in a fiscal loss between 13,000 and 15,000 million pesos annually.
- What historical evidence does Canacintra cite to support their argument? Canacintra references the 2010 increase in tobacco taxes, which led to a thriving black market and failed to reduce smoking rates.
- What policy recommendations does Canacintra propose instead of higher tobacco taxes? Canacintra advocates for long-term health policies and information campaigns to combat tobacco use, rather than fiscal measures.
