Mexico's VAT Revenue Declines in 2024, First Drop Since 2019

Mexico’s Value-Added Tax (VAT) revenue fell in 2024, marking the first real-term decline in five years, according to data from the Ministry of Finance. VAT collection totaled MX$1.41 trillion, reflecting a 1.6% real annual contraction compared to 2023.

The drop in VAT revenue aligns with a notable economic slowdown in Mexico. As a consumption-based tax, VAT accounted for 4.1% of GDP in 2024, down from 4.3% in 2023. Its share of total tax revenue also declined, falling from 30.25% in 2023 to 28.42% in 2024.

Paulina Villanueva, senior associate for economic analysis and sovereign debt, HR Ratings, attributed the decrease to weaker economic activity. While Mexico’s economy grew by 3.2% in 2023, preliminary estimates suggest only 1.5% growth in 2024, leading to reduced consumption and, consequently, lower VAT revenues.

Iván Arias, Director of Economic Studies, Banamex, cited weaker-than-expected consumer spending as another contributing factor. He suggested that a high comparison base in 2023 may have caused an overestimation of VAT revenue projections for 2024.

Despite the decline, the Tax Administration Service (SAT) has set a VAT revenue target of MX$1.46 trillion for 2025, MX$132.9 billion higher than the 2024 goal. Analysts caution that achieving this target could be difficult amid continued economic deceleration.

However, Villanueva highlighted potential revenue opportunities, noting a 35% real-term increase in the Special Tax on Production and Services (IEPS) in 2024.