The finance ministry said the tax on cigarettes would rise to 0.27 sol (RM0.33) from 0.18 sol (RM0.22) each, and high-sugar drinks would now be taxed to 25% instead of 17%

Beverages with more than 20% 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 Martín 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 US$24 billion (RM94.8 billion), or about 11% of its 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% of its GDP, the ministry added.

Vizcarra’s government has also said it would eliminate some tax exemptions following three consecutive years of declines in tax revenues as economic growth has slowed.

The government aims to widen the fiscal deficit to 3.5% of GDP this year before leaving it at 1% by 2021, when it expects the economy to grow by 5%.