Civil Organizations Call for Higher Taxes on Junk Food, Alcohol

In response to increased household spending in Mexico on junk food, alcoholic beverages, and tobacco, civil society organizations are calling for higher taxes on these products. Their consumption is linked to rising rates of chronic diseases that cost the Mexican economy an estimated 4.42% of its GDP.

Through the study, Healthy Taxes: More Resources for Public Health, conducted by the Center for Analysis and Research Fundar, in collaboration with El Poder del Consumidor, the organizations revealed that between 2018 and 2022, spending on beer rose by 14%, on soft drinks by 7.4%, potato chips by 15%, and energy drinks by 47%. The report emphasizes the need to raise taxes on these items for both consumers and companies to address the ongoing public health emergency caused by obesity and diabetes.

The document highlights that during the analyzed period, 55.5% of the adult population consumed alcohol, 76.3% consumed sugary drinks, and 19.5% smoked cigarettes. Among adolescents, although cigarette use dropped significantly—from 9.2% in 2012 to 4.6% in 2022—high consumption rates of other harmful products persist: 90.3% consume sugary drinks, 32.3% eat fast food, and 20.6% consume alcohol.

Alejandro Calvillo, Director, El Poder del Consumidor, pointed out that the leading cause of illness and death in Mexico, which is heart disease, according to 2024 data from INEGI, is closely tied to the consumption of these products. He also attributed their increased popularity to various factors, including advertising, widespread availability, pricing, and promotional strategies used by companies.

Iván Benumea, Coordinator of the Fiscal Justice Program, Fundar, reported that the economic costs related to alcohol, tobacco, obesity, and diabetes combined account for 4.42% of the national GDP. Meanwhile, tax revenue collected from so-called healthy taxes amounts to just 0.6% of GDP. “The costs we are paying through various taxes and the funds allocated to the healthcare system are insufficient to address the damage caused by these products,” Calvillo explained.

In this context, the report outlines the need for changes along three main axes. Firstly, strengthening the IEPS tax on harmful products. The plan proposes a MX$1 increase in the price of cigarettes, which could raise tax revenue by 30.1% and reduce tobacco sales by 13.9%. For alcohol, the introduction of a specific quota per liter of pure alcohol could boost tax revenue by 42.9% compared to 2023. For sugary beverages, the proposal suggests increasing the tax to MX$7/L, potentially cutting sales volume by 27%. Finally, for ultra-processed foods like chips and snacks, the study recommends raising the tax rate from 8% to 20% to curb consumption.

The organizations also propose establishing a budgetary guarantee to benefit individuals without social security coverage through the IMSS-Bienestar program. This guarantee would amount to 3.1% of the programmable spending in the federal budget from the previous fiscal year, which is roughly equivalent to the total IEPS revenue from alcohol, tobacco, sugary drinks, and ultra-processed products.

Finally, the proposal includes removing tax deductions for water rights payments and other contributions, as well as for advertising and marketing expenses. It also calls for ending tax incentives for these industries, implementing a surtax on income earned from activities harmful to public health, and requiring greater transparency in their financial and tax disclosures.

Additionally, Alejandra Macías, Executive Director of the Center for Economic and Budgetary Research (CIEP), stressed that these fiscal measures should be accompanied by policies promoting healthy food options and clear plans for the use of tax revenues.