The opposition-dominated Senate on Wednesday rejected a proposed 5 percent excise tax on soft drinks that had been approved by the lower house, slowing down the passage of the 2007 budget.The Senate voted 73-55 against the tax, with members of the Democratic Revolution Party (PRD) and the Institutional Revolutionary Party (PRI) saying it would hurt poor families.
"We ultimately couldn´t support the creation of a new tax imposed on the public at large," said PRD Sen. Pablo Gómez. "Especially since there are so many fiscal concessions for the rich that are not of great benefit to the economy at large."
The country´s bottling industry also lobbied against the measure, saying it would cause the loss of thousands of jobs.
The government of Felipe Calderón had hoped to collect about US$360 million a year from the soda levy, improving tax collection levels.
The soda tax was part of the income portion of the country´s 2007 budget, which had been passed by the lower house on Monday. The lower house will now have to make adjustments and vote again on the bill.
Arturo García Portillo, a National Action Party official, criticized the PRD and the PRI for rejecting the soda tax.
"It is just plain irresponsible," he said. "They are simply effecting a political pose of protecting the poor, but it will negatively impact budget revenues and the government´s effort to address issues favorable to the poor."
NO SMOOTH RIDE
Calderón had hoped to get his first budget bill through without major changes.
His predecessor Vicente Fox battled with lawmakers over his budget bills, some of which did not gain final approval until the final minutes of the year.
Though the Senate rejection is an initial defeat for Calderón and his economic team, that the budget is passing though Congress is a positive sign, said Mario Correa, an economist at Bank of Nova Scotia´s unit in Mexico City. The lower house of Congress passed Calderón´s 2.26 trillion peso (US$209.1 billion) budget unanimously on Dec. 18 before sending it to the Senate.
"The rejection of this specific tax won´t have a big impact on the budget," Correa said in a telephone interview. "It was expected that legislators would make changes, so it´s not a bad sign of the state of internal politics."
Finance Secretary Agustín Carstens said Dec. 14 that new taxes and better tax collection are needed to offset declining revenue from oil.
The National Association of Soft Drink and Carbonated Water Producers had threatened to seek an injunction if legislators were to approve the tax.
