Mexico ruling party ready to back higher junk food tax -lawmaker

By Dave Graham and Miguel Gutierrez

MEXICO CITY, Oct 23 (Reuters) - Mexico's ruling

Institutional Revolutionary Party (PRI) is ready to support an

opposition proposal to increase a planned tax on junk food, the

party's leader in the Senate said on Wednesday.

Last week, the lower house of Congress approved a planned

fiscal reform containing a measure to impose a 5 percent tax on

junk food, and the Senate is expected to approve the reform by

the end of the month.

Earlier this week Armando Rios Piter, a finance expert from

the leftist Party of the Democratic Revolution (PRD) in the

Senate, proposed increasing the rate on the junk food tax to 8

percent.

Asked whether the PRI could back a higher junk food tax,

which also aims to reduce high levels of obesity in Mexico, the

party's Senate leader Emilio Gamboa told Reuters: "The PRI will

undoubtedly support it."

He noted that the finance committee of the Senate still had

to approve the fiscal bill, which is a key plank of a wider

reform agenda spanning energy to telecommunications that

President Enrique Pena Nieto hopes will boost growth in Latin

America's No.2 economy.Rios Piter estimates that an 8 percent tax would bring in

5.6 billion pesos ($431.90 million) in revenue, versus around

3.5 billion pesos under a 5 percent rate.

The PRI lacks a majority in Congress but a measure backed by

at least part of the PRD is likely to pass the Senate. Any

changes to the fiscal reform would mean sending it back to the

lower house to be signed off again.

Lawmakers also rolled back plans to apply sales tax to

rents, mortgages, property sales and school fees, while raising

the top income tax rate on a sliding scale to 35 percent from 30

percent.

However, a key part of the planned tax overhaul could come

under pressure as it goes through the Senate, after a top

lawmaker on Monday said plans to raise sales tax in border

states should be rejected.

Miguel Barbosa, Senate leader of the leftist opposition PRD,

called for a vote against the government plan to raise the 11

percent value-added tax rate for border states to match the

national rate of 16 percent.

The lower house left that part of the bill unchanged.

The tax bill is tied to the 2014 budget, which must be

signed off on by mid-November.