It would be worth recalculating the IEPS, not only for tobacco, but also for sugary drinks, soft drinks, sweet bread and somehow link that income with spending on public health care for the diseases that are generated (from consuming these products) ” .
Luis Clavellina, director of research at CIEP.
The collection of the Special Tax on Production and Services (IEPS) on cultivated tobacco was the one that showed the best performance last year, in a context in which the IEPS on gasoline, which is usually the one that contributes the most, registered negative numbers.
The collection of the tax on cultivated tobacco registered 47,948 million pesos in 2022, with which it was 1,845 million pesos above what was programmed in the Federal Income Law. However, in annual comparison the amount had a contraction of 2.7% in real terms.
The collection of the IEPS tax on tobacco products had a 40.7% share of the total 117,532 million pesos that the treasury obtained from the IEPS tax during 2022, according to the Report on the Economic Situation, Public Finances and Public Debt of the Ministry of Treasury and Public Credit (SHCP).
During the past year, the SHCP established that the IEPS fee for tobacco products would be 54 cents per cigarette. While for this year the fee is 59 cents due to updating based on inflation.
José Luis Clavellina, research director of the Center for Economic and Budgetary Research (CIEP), told El Economista that although the amount charged for tobacco taxes is important, it is still small in international comparison.
“The only thing that was done is to update the quota due to inflation; It is little compared to what is expected internationally from taxes on cigarettes and it would have to be 74% of the value of the pack (…) In Mexico, approximately 69% is charged (…). We would have to have an increase beyond inflation to reach that percentage”, said the CIEP member.
In this sense, Clavellina explained that there have been proposals to increase an additional peso to what is charged by IEPS for a cigarette. The CIEP simulator calculates that if 1.59 pesos per unit were collected, 67,491 million pesos could be collected in 2023.
The SHCP projected that the collection of IEPS taxes on cultivated tobacco will be 50,114 million pesos for this year, which represents an increase of 0.5% in real terms.
Discourage consumption
The interviewee explained that the IEPS tax on tobacco is intended to discourage consumption and have income to care for the population that is sick with lung cancer as a result of smoking.
“We have seen that the possibility exists that by increasing the price of cigarettes people will stop smoking,” he said. The truth is that by increasing prices, people who continue to smoke will spend less on education or health for continuing to smoke, which is a negative impact for people, she added.
However, the simulator of the research center calculated that charging 1.59 pesos per cigarette, the sale of packs would decrease by 16.5%, going from 1,284 million packs to 1,073 million.
The CIEP estimates that of the 67,491 million pesos that would be obtained with an increase of one peso, 47,569 million pesos could be allocated to the Ministry of Health and 19,922 million pesos to the Federative Entities.
He considered it feasible to recalculate the special tax, not only on tobacco, but also on sugary drinks, soft drinks, sweet bread, and somehow link that income with spending on public health care for diseases caused by the consumption of said products.
