“That’s why they are expensive”; point out fiscal anatomy of a pack of cigarettes

“That’s why they are expensive”;  point out fiscal anatomy of a pack of cigarettes

Within the national territory there are various addictive substances, for legal consumption by citizens, being caffeine, sugar, alcohol and tobacco some of the most consumed by society; however, these products in recent years have increased their prices considerably, which makes an analysis of the fiscal anatomy of a pack of cigarettes, for example, help to understand why maintaining this habit is so expensive.

Smoking is an addiction that affects all regions of the world, Currently it is estimated that there are just over 7.9 million smokers worldwide, China being number one on the list, with just over 1,450,485,148 smokers, followed by India with 1,407,626,336 and the United States with just over 334,918,357; however, at the Latin American level, Mexico holds fourth place in the smoking rate, surpassed only by Dominica, Saint Vincent and the Grenadines, and Argentina.

Fiscal Anatomy of a Cigarette Pack

Smoking in Mexico has become a health problem for millions of people, since according to what is indicated by the National Institute of Public Health (INSP), there are currently just over 10 million male smokers and just over 4.1 million female smokers, of which it is estimated that at least 6 percent of adolescents are considered active smokers, likewise, tobacco use causes more of 60 thousand deaths per year, which is why the World Health Organization (WHO)seeks to reduce tobacco consumption with various taxes, while providing significant tax revenue to the government.

Cigarettes are one of the products in which the most taxes are paid within the country, since when purchasing them the consumer pays two different taxes, for example, the special tax on production and services (IEPS) and the value added tax (VAT), in addition to some others, such as the added price if they buy in department, grocery or self-service stores, since a package of 14 pesos is around 40 pesos while one of 50 can exceed 70 pesos.

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The Special Tax on Production and Services, as has been pointed out, was implemented in the search to reduce its consumption, since within legislation a table of 160 percent is considered, to be calculated on the price at which the retailer acquires the cigarettes, plus a fee of 35 cents per cigarette. If the price of a pack of 20 cigarettes is 13.55 pesos, an extra 21.68 pesos are paid for the 160 percent rate, plus 7 pesos for the fee of 35 cents per unit, resulting in 42.23 pesos, to which the Value Added Tax (VAT) is calculated, whose rate is 16 percent, which results in 6.76 pesos and a price to the consumer of 48.99 pesos, that is, 72.35 percent of what is paid with taxes.

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And although the measure seeks to prevent smoking, this result is counterproductive, since the National Council of the Tobacco Industry (CNIT) points out that the market for pirated cigarettes, in recent years, is at least 17 percent within the national territory; nevertheless, As of January 1, 2022, cigarettes, along with soft drinks and gasoline, have been established an increase in the rate of the Special Tax on Production and Services (IEPS) of at least 7.36 percent, registered in the Official Journal of the Federation.

Tobacco consumption in Mexico is a serious health problem, so knowing the reason why its price is constantly increasing can help consumers to assess the problem that results in spending for the economic income of hundreds of families.

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