Mexico’s Pet Food Tax

Will fewer people in Mexico opt to adopt pets now that there's a 16% VAT on pet food?

Will fewer people in Mexico opt to adopt pets now that there’s a 16% VAT on pet food?

On January 1, 2014, Mexico instituted a 16% value added tax (VAT) on retail sales of processed pet food. The hefty tax is part of President Enrique Peña Nieto’s plan to diversify Mexico’s revenue sources; currently a third of the country’s revenue comes from oil income.

Fido is a luxury

According to the Mexican government, pet food is a luxury item, and pet ownership is a “recreational activity” rather than a “basic need.” This may come as a surprise to many pet owners, who consider their feline and canine companions to be integral parts of their families.

14 million dogs and cats are family pets in Mexico, and approximately half of all Mexican households have pets. Sales of processed pet food amounts to about $2.2 billion each year, making Mexico’s pet food market the 10th largest in the world. According to the Wall Street Journal, “[p]et-food companies estimate that half of the country’s pet owners use commercial pet foods, while the rest whip up homemade concoctions, usually a mixture of chicken, rice and tortillas.” Since whole foods are tax-exempt in Mexico, the country’s most favored pets may soon be feasting on table-scraps.

Throw Momma from the Train

While many Mexican pet owners will absorb the additional expense without complaint (or without altering their pet-food buying habits), the “bulk of the kibble sold in Mexico is at the cheapest price points.” The pet-food industry estimates that “the tax will hit more than one-third of the country’s low-income households.”

13 million dogs and cats already live on the streets of Mexico. Will the new pet food tax encourage Mexican families already struggling to make ends meet to throw their pets from the train, or at least show them the door? Some animal welfare advocates are reportedly worried it will. “[T]he tax could lead to more homeless animals, or act as a disincentive to adopt pets.” In addition, shelters interviewed by the Wall Street Journal note that the higher cost of food “could mean they help fewer animals.”

At least food for horses, a favorite pet among the wealthiest Mexicans, is still tax free. Horses are considered livestock, and livestock feed is tax exempt.

Does your company sell globally? How do you keep track of sales tax changes around the world?

photo credit: sarihuella via photopin cc

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