Mexican Lawmakers Review Higher Cigarette Tax as Industry Warns of Black-Market Growth

Mexico’s lower house is weighing higher taxes on cigarettes and alcoholic drinks, but the proposal has already drawn a sharp warning from industry representatives: raise the price too far, and illegal sales could take over more of the market.

Carol Antonio Altamirano, president of the Chamber of Deputies’ Finance Commission, said lawmakers would review the federal government’s economic package responsibly ahead of its Sept. 8 submission deadline. “We do need to review some proposals that could help public health and also tax collection, and we will analyze all these measures,” he said.

The commission presented conclusions from five working groups made up of specialists, academics and representatives from different economic sectors. The industry position featured prominently, citing the risk of a larger black market and increased extortion of small merchants.

The groups pointed to Australia, where lawmakers approved one of the world’s most aggressive anti-smoking policies. Cigarette prices rose by as much as 282%, reaching up to 50 Australian dollars per pack, with about 30 dollars made up of tax. The policy worked during its first months, the document said, but Australia’s Senate later recommended freezing the tax after the illegal market grew to supply about 80% of consumption.

Mexico already faces a substantial illicit-cigarette market, with one in four cigarettes consumed in the country coming from illegal sources, according to the positions presented to the commission. Industry representatives also said organized crime pressures small businesses to sell counterfeit cigarettes, adding another risk lawmakers must consider.

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We do need to review some proposals that could help public health and also tax collection, and we will analyze all these measures.