The collection of IEPS on gasoline surges in Mexico: Impact on prices?

Tax collection is a fundamental issue for any government, as it largely determines the ability to finance programs, services, and projects for the benefit of society. In Mexico, the Ministry of Finance and Public Credit (SHCP) has achieved a significant increase in the collection of the Special Tax on Production and Services (IEPS) applied to gasoline during the first four months of the current year. This 173% increase, compared to the same period of the previous year, has been made possible thanks to the stability of global oil prices and the policy of reducing or freezing fiscal supports by the Ministry. According to official figures, in the first four months of 2024, the collection of IEPS on gasoline amounted to 126,819 million pesos, surpassing by more than half the amount collected throughout the year 2023, which was 230,082 million. This increased resource collection has occurred in a context where the government has chosen to charge the IEPS at 100%, without applying the discounts or fiscal incentives it used to grant to cushion possible increases in oil prices. Analyst Ramses Pech has emphasized that, if the current trend continues, the collection from IEPS on gasoline could reach 350,000 million pesos, marking a milestone compared to previous years. The stability in oil barrel prices has played a key role in this situation, as it has not been necessary to expand fiscal incentives, allowing the Ministry to collect the tax in its entirety without affecting inflation, as stated by the government. It is important to note that the IEPS rates vary weekly and are published in the Official Gazette of the Federation. These rates, set for a whole year, have experienced a significant increase from one year to another. For example, the rate for Magna gasoline has increased from 3.12 pesos per liter to 5.51 pesos, while the Premium rate has risen from 3.66 pesos to 5.21 pesos, and the diesel rate has gone from 2.46 pesos to 6.25 pesos per liter in the same period. This increase in the IEPS rate, combined with the fact that the tax represents a larger proportion of the final price of fuels compared to previous years, could generate pressures for an increase in gasoline prices in Mexico. According to data from the National Institute of Statistics and Geography (Inegi), the price of Magna gasoline has increased by 5.2% in the first four months of this year, exceeding the accumulated inflation in the same period. It is evident that the collection from IEPS on gasoline has experienced significant growth in the current year, which has been made possible thanks to a combination of factors such as the stability of global oil prices and the policy of reducing fiscal incentives by the Ministry. However, it is important to closely monitor the evolution of fuel prices in the national market, as an increase in fiscal pressure could impact consumers' wallets and the economy in general.