Mexico Raises Health Taxes on Sugary Drinks, Tobacco for 2026

Mexico put into effect higher excise taxes on sugar-sweetened beverages, noncaloric sweetened drinks and tobacco products on Jan. 1, 2026, following approval of its economic package for the year. Federal authorities say the measures aim to reduce consumption linked to chronic disease while increasing public revenue.

“Health taxes are one of the strongest tools we have for promoting health and preventing disease,” says Tedros Adhanom, Director General, World Health Organization (WHO). The agency is urging governments to strengthen taxes on sugary drinks, alcohol, and tobacco to reduce harmful consumption and raise funds for health services.

The tax changes were enacted through amendments to the Special Tax on Production and Services (IEPS), a levy that has existed in Mexico since 1980 but was first expanded to cover sugary drinks in 2014. Under the new provisions, the tax on beverages sweetened with sugar increased from MX$1.64 (US$0.09) to MX$3.08 (US$0.17) per liter, an increase of about 87%. Cigarettes sold in packs now face an ad valorem rate of 200%, up from 160%. For the first time, beverages marketed as “light” or “zero,” which contain no sugar or calories but use sweeteners, are taxed at MX$1.5 pesos per liter.

The Ministry of Finance and Public Credit said the changes aim to discourage consumption of products associated with noncommunicable diseases, including diabetes, obesity, and hypertension. According to government data cited in the reform, tobacco use is linked to more than 63,000 deaths annually in Mexico, while consumption of sugary drinks contributes to obesity or related conditions affecting more than 76% of adults over age 20.

Finance officials estimate the higher rates will generate about MX$41 billion (US$2.30 billion) in additional revenue in 2026. Authorities say the funds are expected to support health objectives, although the legislation does not explicitly earmark the revenue for health spending, a point that has drawn criticism from researchers and civil society groups.

Rafael Lozano, Professor and Researcher, Universidad Nacional Autónoma de México (UNAM), says the IEPS reforms reflect a broader trend of using taxation as a public health tool, often referred to as “taxes for health.” He notes, however, that the term has been referred to in Mexico as “healthy taxes,” which he says is misleading. According to Lozano, such taxes represent a fiscal burden and do not automatically lead to better health outcomes unless revenues are directed to prevention and care.

Lozano points to findings by Mexico’s federal audit office showing that revenue from the 2014 soda tax entered general government accounts because it lacked a specific health designation. While studies found that the earlier tax reduced purchases of sugary drinks, particularly in the first years after implementation, he says the policy was not accompanied by broader measures promised at the time, such as funding for prevention programs, strengthening primary care, or installing drinking water fountains in public schools.

He adds that the price increases had a proportionally larger impact on low-income households, which spend a greater share of their income on such products. Public spending on prevention and health promotion, he says, did not rise in line with the additional tax revenue, leading the measure to function as a general tax rather than a targeted health policy.

Civil society organizations, including El Poder del Consumidor, Salud Justa Mx, and Fundar, support the idea of earmarking IEPS revenue for health but argue that the approved increases are insufficient. They propose raising the tax on sugary drinks by MX$7 per liter to reach at least 20% of the final price, the minimum level recommended by the WHO to achieve significant reductions in consumption. The groups estimated that such a rate could increase annual revenue from the tax to more than MX$78 billion.

Alejandro Calvillo, Director, El Poder del Consumidor, says that large corporations producing sugary beverages generate substantial profits while contributing to higher rates of disease. He cites international examples, including India, where a 40% tax on such drinks was recently approved, to argue that higher rates can be effective. The organizations also called for transparency in the management of public funds collected through the taxes.

International institutions have echoed support for stronger fiscal measures. The World Bank says higher taxes on tobacco and sugary drinks are among the most cost-effective ways to prevent noncommunicable diseases and address market failures associated with harmful products. The bank has reported that tobacco tax increases approved in Mexico in 2007, 2010, and 2019 contributed to a 31% reduction in smoking rates and thousands of avoided deaths, while the 2014 sugary drink tax led to declines in household purchases in the first two years after implementation.

The WHO also warns that many countries fail to adjust health-related taxes for inflation, allowing products such as sugary drinks and alcohol to become more affordable over time. In recent reports, the agency found that median taxes on sugary drinks globally account for only about 2% of retail prices and often apply to only a subset of products, while alcohol taxes in many countries have not kept pace with income growth, contributing to higher rates of injury and disease.

In Mexico, the absence of earmarking in the 2026 economic package remains a central issue. Iván Benumea, Representative, Fundar, says the legislation does not specify that new IEPS revenue be directed to health programs, despite public statements to that effect. Several organizations have proposed creating a dedicated health fund linked to the Ministry of Health and IMSS-Bienestar to improve traceability of the resources. Opposition lawmakers, including PAN Deputy Éctor Ramírez, publicly call for directing the funds to hospitals, medicines, and medical care.

Lozano says higher taxes alone are unlikely to resolve Mexico’s public health challenges. He points to experiences in countries such as the United Kingdom, where manufacturers were incentivized to reformulate products, and the Philippines, where tobacco and alcohol tax reforms were used to finance public health insurance. Without complementary policies addressing production, prevention, and care, he says, price measures may have limited long-term impact on disease trends.