UPDATE 1-Mexico Senate approves tax reform, some details pending
MEXICO CITY, Oct 29 (Reuters) - Mexico's Senate on Tuesday gave general approval to a tax overhaul aimed at raising weak government revenues by slapping higher taxes on the rich, levies on sugary drinks and junk food, and a charge on stock market gains.
A main plank of an economic reform agenda that President Enrique Pena Nieto hopes will strengthen Latin America's No.2 economy, the reform seeks to raise tax revenue by nearly 3 percent of GDP by 2018.
Opposition lawmakers have sought to knock down or change some parts of the bill and were set for a marathon debate through the night, but ruling party officials were confident the changes would not significantly erode potential revenue.
The lower house of Congress watered down Pena Nieto's bill earlier this month, throwing out some planned levies against the backdrop of an economic slowdown. They also raised the top income tax rates to push more of the burden onto the wealthy.
Senators signed off on the broad outlines of the bill and must now vote on disputed elements. Any changes they make would then need to be voted on by the lower house.
Lawmakers will consider calls to raise a planned levy on junk food from 5 percent to 8 percent. Junk food is defined as products that contain more than 275 calories per 100 grams, which would hit chocolate in the land that gave it its name.
An 8 percent tax on junk food would raise about 5.6 billion Mexican pesos ($435 million) a year, lawmakers said, or less than 0.04 percent of GDP.
Opposition conservatives fought against much of the bill and have been pushing hard to strip out a measure to raise the value-added tax (VAT) rate for states on the U.S. border to 16 percent from the reduced rate of 11 percent they currently enjoy.
The changes made to the tax bill by the lower house in mid-October created a shortfall in the budget plan for next year.
That prompted lawmakers to raise the government's oil revenue estimate and make other changes to close the funding gap. These are due to be voted by the Senate on Wednesday.
The tax bill is tied to the 2014 budget, which must be approved by mid-November. It is one of the cornerstones of a reform drive spanning energy to telecommunications that Pena Nieto hopes will boost growth that has lagged fellow emerging markets and averaged around 2 percent a year for a decade.
The last major reform pending in Congress is the president's planned overhaul of the state-controlled energy sector, which the government hopes will attract investment, help stem a slide in oil output, and power economic growth.
Pena Nieto proposed an energy revamp in August that would loosen the grip on the sector of state oil monopoly Pemex and offer private companies profit-sharing contracts.
If approved as presented, this would mark the largest opening of the energy sector to the private sector in decades.
However, the reform has stopped short of offering production-sharing contracts or concessions that oil majors had been hoping for, and many viewed it as cautious.
Some lawmakers believe the energy plan could still be amended to attract more investment.