File photo from April 15, 2024, showing a person at a tequila exhibition in Guadalajara, Jalisco, Mexico. EFE/Francisco Guasco
Mexico City, Aug 14 (EFE) – The Mexican alcoholic beverage industry has proposed a modification to the Special Tax on Production and Services (IEPS) scheme so that the tax is calculated based on the alcohol content rather than the value of the beverage. This would reduce incentives for the illegal market, increase tax revenue, and facilitate the formalization of small producers.
Panambí Garcés, director general of the Commission for the Wine and Spirits Industry (CIVyL), explained to EFE that the sector is in talks with the Ministry of Finance and its head, Édgar Amador, as well as legislators in the federal Congress, to promote an “ad quantum” system. This system would be based on the percentage of alcohol in each beverage, not its price, in order to simplify the system and strengthen tax enforcement.
This proposal could increase revenue by up to 70% if it succeeds in reducing tax evasion, according to CIVyL, which notes that the IEPS (Special Tax on Production and Services) on alcoholic beverages generated approximately 75 billion pesos in 2024 (about US$4.386 billion).
Garcés estimated that beer accounts for almost 95% of the market, while wines, liquors, and spirits represent around 5%, although they face a higher tax burden. The tax on beer reaches up to 26%, and on wines and spirits, it is 53%, which, in her opinion, creates a strong economic incentive to evade taxes.
In this regard, Garcés estimated that the change would represent about one peso (US$0.06) more per can of beer, but would have a significant impact on public finances due to the volume of this category.
The executive indicated that a commercial beer has an average alcohol content of 5%. Wines are generally taxed between 5% and 18%, and spirits between 26% and 51%, which would significantly impact the current tax structure for all industry players.
The sector also links this reform to combating the illegal market, as Garcés stated that this sector grew by 54.9%, compared to 28.5% for the legal market.
According to his estimates, 44.2% of the market exhibits some form of illegality, equivalent to four out of every ten bottles, whether due to tax evasion, regulatory non-compliance, or, to a lesser extent, adulteration.
According to his data, illegal products can be sold for up to 40% less than a legal beverage, while 21.2% of the total black market represents a direct health risk.
According to Garcés, the loss to the State amounts to 19.5 billion pesos (almost 1.14 billion dollars) annually, while the problem also generates unfair competition and health risks for consumers.
Furthermore, the organization estimates the illegal market to be worth 55.689 billion pesos (approximately US$3.257 billion).
Garcés also pointed to irregular sales on digital platforms and social media, and practices of undervaluation at customs, such as declaring fifty bottles of whiskey worth one dollar. He therefore called for stricter controls on import declarations and importer registries.
The sector is also promoting checking labels and buying through formal channels, while seeking to bring micro-producers into the legal market.
He added that Mexico has six beverages with designations of origin—tequila, mezcal, bacanora, sotol, raicilla, and charanda—produces wine in eighteen of its 32 states, and is the world’s fourth-largest exporter of alcoholic beverages.
