A new proposal in Mexico’s Congress would replace value-based alcohol taxes with an alcohol content-based system, aligning with best international practices. However, the rates suggested are set far too low and would ultimately make alcohol more affordable – undermining both health and revenue goals.

“Adjust IEPS to alcoholic beverages with a fixed rate per degree of alcohol”

Noticias Enfacis reports:

“MP Vanessa López Carrillo, from the Labour Party (PT), presented a bill to reform the Special Tax on Production and Services (IEPS) Law, which seeks to establish a general levy of 2 pesos per degree of alcohol per litre on alcoholic beverages and beer, while traditional beverages with a designation of origin would be subject to a levy of 1.6 pesos per degree per litre.

“The proposal, referred to the Finance and Public Credit Committee, aims to increase local tax revenue, simplify the tax structure and reduce tax evasion, while promoting the preservation of traditional techniques and protecting producers of beverages such as mezcal and tequila from industrial competition.

“López Carrillo stressed that the current scheme, based on market value rather than alcohol content, creates tax inequality and puts traditional beverages at a disadvantage compared to spirits and low-quality products.

“If approved, the reform would allow for an ad-quantum system, already applied in OECD countries, which, in addition to providing greater fiscal certainty and tax equity, would strengthen rural economies, preserve ancestral practices and reduce the risks of evasion and the black market.”

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More articles on the same topic:

PT proposes reforming IEPS Law, imposes quotas on alcoholic beverages

MPs propose reducing IEPS tax on artisanal beverages such as mezcal and tequila

Proposal to reform the IEPS Law to reduce the tax burden on alcoholic beverages with designation of origin

Assessment

As detailed in the September 4 Media Snapshot, this reform reflects the alcohol industry’s lobbying strategy disguised as “fiscal modernisation”. The shift from ad valorem to specific taxation is welcome and long overdue – it would simplify the tax system and align Mexico with WHO-recommended best practices. But the proposed rates of 2 pesos per degree per liter (and even less for designated-origin beverages like tequila and mezcal) are very low. Instead of making alcohol less affordable, as effective taxation should to reduce population-level alcohol consumption and improve health, economic, and social outcomes, the reform would lead to cheaper alcohol and increased harm.

The cultural framing of “protecting traditional beverages” is a convenient cover for granting carve-outs to powerful Big Alcohol players. If passed, the reform would represent a missed opportunity for Mexico to harness alcohol taxation as a tool to prevent and reduce alcohol harm and strengthen public revenues – especially in the face of the massive and growing alcohol burden.

Rather than addressing health and equity, the proposal reveals how vested interests are shaping fiscal policy to protect their private profits. Exposing this Big Alcohol capture is essential for advocates to demand an alcohol tax policy that serves communities and people’s health.