Mexico Reduces Fiscal Stimulus to Gasoline, Consumers To Pay IEPSBy Anamary Olivas | Mon, 08/15/2022 - 21:45
The Mexican Government will reduce the tax incentive for Magna gasoline, the most popular fuel in the country, matching a drop in international oil prices. Consumers of this fuel will now be paying part of the Special Tax on Production and Services (IEPS).
The Ministry of Finance removed the complementary fiscal stimulus from the so-called Magna gasoline and reduced the stimulus to the IEPS quota, five months after a strategy of subsidizing fuels was implemented to keep fuel prices stable compared in a rocky market environment. This action is added to last week’s similar measure regarding the IEPS of Premium gasoline.
The drop in the international price of oil caused the treasury to soften the tax incentives for Premium and Magna and return the costs to the customer. In the Official Gazette of the Federation (DOF), the Ministry of Finance published in that for the week from Aug. 13 to 19, 2022, there will be no fiscal stimulus complementary to the IEPS for Magna gasoline. Meanwhile, the traditional IEPS quota for each liter of gasoline will be reduced.
This means that the treasury will begin to charge a percentage of the IEPS to customers again, though this does not ensure that the price of regular gasoline will rise significantly. For the week in question, the fiscal stimulus for Magna will be 94.12 percent, which is equivalent to US$0.24/l that the government will absorb. Customers will pay the remaining IEPS.
Meanwhile, Premium gasoline will continue for the second consecutive week without a complementary fiscal stimulus. Furthermore, the stimulus to the IEPS quota is significantly reduced to 72.34 percent. Diesel, more often used by long-distance transportation, will continue to receive complementary tax incentives and 100 percent of the IEPS tax incentive.
The drop in fiscal stimuli occurs when the price of international oil begins to yield somewhat in comparison to the high prices that it reached on the back of the war between Russia and Ukraine. The Mexican Export Mix reached US$89.14/b on August 11, more than the US$84.20/b seen a week ago, according to PEMEX data.