Latinnews Daily - 22 December 2006

 Significance: The approval comes after President Felipe Calderón was forced to scrap his proposal for a 5% tax on soft-drinks, which was rejected by opposition senators on 19 December. Although the tax would only have raised US$360m, its fate shows the power of the soft-drinks lobby in Mexico and the difficulties the new government will have in raising new taxes to substitute for declining oil revenues.

Mexico has one of the lowest levels of taxation in Latin America and the government depends in large part on the state oil firm Pemex to fund its budget. Among other innovations in the 2007 budget, the tax on cigarettes will be raised from 110% to 160% over the next three years.

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