“The IEPS in general are good in the sense that their objective is not to collect money but to discourage certain behaviors on the part of the population; reduce the consumption of alcoholic beverages, foods with high caloric density or even the use of fossil fuels. In that sense, I think they fulfill their function, but there is also the possibility that by not collecting as much, their rates could increase,” commented Diego Díaz, Public Finance coordinator of the Mexican Institute for Competitiveness (IMCO).
Although the collection of these IEPS grew in absolute terms, their contribution to total income remained in the same proportion, from 4.1% in 2018 and 2019, it went only to 4.2% at the end of last September, the Treasury stated.
During the last six-year term, and without a tax reform, few changes were made to the taxation of these products, such as the activation of the inflation update, each year, of the rate per liter of soft drink, and per cigarette (75 grams ) starting in 2020. Prior to this change, the fee for soft drinks was one peso per liter, from 2014 to 2019, and with updates year after year due to inflation in 2024 it is 1.57 pesos per liter.
However, Mexico is the fourth country in the world that consumes the most soft drinks with 133 liters per person in 2022, ahead of Belgium, Argentina and the United States, says Statista.
Meanwhile, it remains pending how to label these resources to be used to avoid and address the evils caused by the consumption of this type of products, says the Center for Economic and Budgetary Research (CIEP).
Also pending for the Sheinbaum government are making changes to the tax on beers, wines and spirits; in addition to applying a “sufficiently high” tax so that cigarette manufacturing companies pass on most of this increase to consumers, following the objective of discouraging their consumption, the Organization for Economic Cooperation and Development (OECD) recommended last week. passed in a study carried out for Latin America.
In Mexico, the total annual medical costs attributable to smoking alone amount to 4,768 million dollars, about 95,360 million pesos. The amount collected by IEPS from tobacco produced in 2023 barely represents more than half, 48,156 million pesos, according to figures from the OECD and the Treasury.
“I think that in a context of public finances, the new federal government should look at this type of taxes (…) there is room for maneuver to increase the rates of these taxes, and in that sense consumption is discouraged, and at the same time, raise a little more,” said Díaz.
He considered that these changes should occur, whether or not a major tax reform occurs, since the current administration has ruled out a tax reform that would increase taxes, at least in the first years of government.
