MEXICO CITY--A Mexican industrial group said Tuesday an increase
in tax on cigarettes that went into effect in 2011 has led to a
proliferation of contraband, and that illegal cigarettes now
account for nearly 17% of the cigarettes sold in the country.
The Confederation of Industrial Chambers, or Concamin, said
tobacco consumption hasn't declined in the year-and-a-half since
the higher tobacco tax took effect, although the sale of illegal
cigarettes has reached record levels.
Congress approved the higher tax on cigarettes in late 2010
despite protests from the country's cigarette manufacturers--local
units of Philip Morris International Inc. (PM) and British American
Tobacco PLC (BTI, BATS.LN)--and from tobacco growers.
Finance Ministry data show the government collected MXN16.5
billion ($1.25 billion) from the tobacco tax in the first six
months of this year, about 9% more than in the first half of 2011
and slightly more than it collected on alcoholic beverages,
including beer.
Excise taxes on cigarettes, alcohol, telecommunications and
other goods and services helped to partially offset the fiscal
subsidy on gasoline in the first six months of the year as
state-owned oil monopoly Petroleos Mexicanos sold the fuel at less
than it cost to import it.
Concamin said its study showed most of the contraband cigarette
sales are at open markets and informal establishments, and the
buyers are mostly men in low-income segments of the population. The
highest rates of contraband cigarette consumption were in the
northwest and south of the country.
The group said most of the more than 5,000 people surveyed
across the country considered that the price of legal cigarettes,
which averages 35.50 pesos for a pack of 20, was high, and the
price of contraband brands of about MXN20.50 per pack was fair.
Concamin said the tax was distorting the domestic market for
tobacco, and called for action to curtail the sale of illegal
cigarettes. Finance Ministry officials weren't immediately
available to comment.
Write to Anthony Harrup at anthony.harrup@dowjones.com
Subscribe to WSJ: http://online.wsj.com?mod=djnwires