Mexico Keen To End 'Soda Tax' War With US

by Leroy Baker, Tax-News.com, New York

08 December 2006

The Mexican government has proposed a change in the way sweeteners used in soft drinks are taxed, to end discrimination against imported sweeteners from the United States.

Under the Mexican tax first imposed in January 2001, soft drinks made with imported sweeteners, such as high-fructose corn syrup (HFCS) and beet sugar, are subject to a 20% tax on their sale and distribution, while beverages made with Mexican cane sugar are tax-exempt, in order to protect the domestic sugar industry.

The United States claims that this tax regime unfairly discriminates against its corn refining industry, while also imposing a 20% tax on services used to transfer soft drinks and syrups (e.g., distribution services). In addition, the US says that the beverage tax subjects taxed products to several bookkeeping and reporting requirements.

The World Trade Organisation upheld a complaint against the Mexican tax regime in a ruling issued earlier this year.

Mexico's new Finance Minister, Agustin Carstens, has said that the government will propose to Congress that the tax on all sweeteners used in the manufacture of soft drinks should be charged at a rate of 5%.

Mexico has also agreed to a deal whereby the United States accepts 500,000 tonnes of sugar imported from Mexico tariff-free between 2006 and 2007, and Mexico takes 500,000 tonnes of high-fructose corn syrup from US producers.

Recommended