The Mexican Senate is considering a bill to increase the tobacco tax, arguing that it would improve public health by discouraging tobacco use and boost government revenue. However, experts warn that the move could also fill the coffers of some of Mexico’s major criminal cartels.
President Claudia Sheinbaum has proposed raising Mexico’s ad valorem tobacco tax from 160% to 200%. Additionally, the per-cigarette quota tax is expected to nearly double by 2030. While the government’s intent is to secure more funding, this increase may have unintended consequences.
Manuel Perez Aguirre, a postdoctoral researcher at the College of Mexico, explains that a higher tobacco tax could lead to an expansion of the black market for cigarettes, which is largely controlled by criminal organizations. “The government and its representatives are looking for more money, but they are not taking into account the side effects of that,” he said. “It’s a huge amount of money—not for the Mexican government, but for the criminal organizations.”
Mr. Perez identified two of Mexico’s most prominent cartels—the Sinaloa Cartel and the Jalisco New Generation Cartel (CJNG)—as key players in the illicit cigarette market. While it is difficult to estimate exactly how much additional revenue these groups would gain from the tax hike, the figure depends largely on consumer shifts to illegal products and the extent of cartel control.
A significant increase in the black market is plausible. When tobacco taxes were raised in 2011, the share of illegal cigarettes jumped from 2% of the market in 2010 to nearly 17% by 2013, according to one study. More recent estimates suggest that illegal cigarettes make up as much as 20% of the market, though it remains unclear what proportion benefits the cartels.
In recent years, President Donald Trump’s swift actions to curb migrant smuggling across the U.S.-Mexico border have impacted the income streams of Mexican cartels. Nevertheless, these organizations have been diversifying their activities, with the illegal tobacco market representing a growing opportunity.
As Mexico moves forward with the proposed tax increases, policymakers will need to balance the potential public health benefits and increased government revenue against the risk of empowering criminal enterprises.
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*Read the full article at The Washington Times.*
**Topics:** Crime/Corruption, Foreign Affairs
**Keywords:** Mexico, Tobacco Tax, Cartels, Black Market
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