“The Lifeline for Tax Revenues Were Cigarettes, Soft Drinks, and Gasoline”
El Cronista reports:
“The quarterly public finance report showed that tax revenues contracted 0.6% in real annual terms, with income tax falling 4.1% and VAT down 3.7%. The great lifeline for tax revenues were cigarettes, soft drinks, and gasoline, as the Special Tax on Production and Services (IEPS) grew by nearly 20% annually.
“The IEPS also applies to beer, alcoholic beverages, junk food, betting, telecommunications, and energy drinks. But all of these products saw a decrease in tax collection during the period.”
Assessment
The Q1 figures put hard numbers on what advocates have long argued: raising excise taxes on health-harming products works – both for public finances and for preventing and reducing alcohol harm. Tobacco IEPS revenue rose 30.1% in real terms to MXN $27,067 million, and soft drink IEPS revenue rose 31.7% to MXN $13,176 million, directly reflecting the rate increases introduced in the 2026 Federal Revenue Law. Alcohol was not part of those adjustments, and the result is visible in the data: IEPS collection on beer and alcoholic beverages fell during the same period.
This outcome arrives in a policy environment where alcohol tax reform has been debated intensely but so far deferred. World Bank analysis has estimated that evidence-based alcohol taxation in Mexico could reduce alcohol use by 42% and increase alcohol tax revenue by 203%. The OECD’s 2026 Economic Survey of Mexico has similarly flagged alcohol tax reform as a win for both health and public finances. Yet the government chose to adjust rates only for tobacco and sugary beverages, leaving the alcohol IEPS unchanged.
Meanwhile, the alcohol industry has been actively lobbying to reshape any future IEPS reform in its favour, pushing proposals that would effectively lower the tax burden on alcohol. The Q1 data adds another data point to an already extensive evidence base: the categories where the government did raise rates generated substantial new revenue. Alcohol’s declining collection, meanwhile, illustrates the cost of inaction as the next budget cycle approaches.