LIMA (Reuters) – The Peruvian government hiked excise taxes on sugary drinks, alcohol, cigarettes and polluting cars on Thursday in a bid to tackle public health problems linked to obesity and cancer while shoring up public resources.
The finance ministry said the tax on cigarettes would rise to 0.27 sol ($0.08) from 0.18 sol each, and high-sugar drinks would now be taxed to 25 percent instead of 17 percent.
Beverages with more than 20 percent alcohol content and used cars powered by petroleum-derived gasoline will also face higher taxes. Dual-fuel cars, which are run partly on natural gas or other cleaner fuels, will be tax free, the ministry added.
The National Society of Industries, a manufacturing association, warned the tax hikes in Peru would lead to more contraband and pirated goods.
The government of President Martin Vizcarra, who took office in March, promised to be vigilant of attempts to evade the new taxes. It said demand for alcoholic and sugary drinks has been rising while public resources for health care have fallen.
Addressing the impacts of non-communicable diseases – associated with smoking, drinking, obesity and pollution – costs Peru $24 billion, or about 11 percent of GDP, every year, the finance ministry said, citing a study from Harvard University.
Government spending on health care in Peru is only about 3.7 percent of gross domestic product, the ministry added.
Vizcarra’s government has also said it would eliminate some tax exemptions following three straight years of declines in tax revenues as economic growth has slowed.
The government aims to widen the fiscal deficit to 3.5 percent of GDP this year before leaving it at 1 percent by 2021, when it expects the economy to grow by 5 percent.
Reporting By Mitra Taj; Editing by Chris Reese