Overview of Tax Revenue Losses in 2025
The Mexican federal government is expected to forgo a larger proportion of tax revenue in 2025 compared to 2024, as it aims for fiscal consolidation through increased income and public spending cuts. The Secretaría de Hacienda y Crédito Público (SHCP) released the “Renuncias Recaudatorias 2025” document, which outlines that fiscal expenditures—such as deductions, reduced rates, stimuli, presidential decrees, and other tax benefits—will account for 4.39% of the Gross Domestic Product (GDP), equivalent to 1,579,748 million pesos.
Tax Revenue Losses Breakdown
- Value Added Tax (IVA): The largest tax expenditure, with an estimated 653,759 million pesos (1.82% of GDP) lost due to the zero-rate on food and medicine, along with other reduced rates.
- Personal Income Tax (ISR): Deductions for individuals will result in 384,909 million pesos (1.07% of GDP) in lost revenue.
- Corporate Income Tax (ISR): Deductions will lead to a loss of 149,990 million pesos (0.42% of GDP).
- Excise Taxes (IEPS): The estimated tax expenditure is 19,208 million pesos (0.05% of GDP).
- Presidential Decrees: The estimated tax expenditure is 371,882 million pesos (1.03% of GDP).
Regressive Nature of Fiscal Benefits
According to analysts, fiscal benefits are generally regressive as they predominantly benefit higher-income individuals. Jorge Cano, coordinator of the Public Spending and Accountability Program at Mexico Evalúa, pointed out that personal income tax deductions mainly benefit wealthier families, while there are concerns about who benefits most from the zero-rate on food and medicine.
“All benefits are concentrated in the highest income decile. It’s regressive not only because it’s poorly distributed but also by design,” said Carlos Brown, director of Oxfam Mexico’s Programs.
Key Questions and Answers
- What are fiscal benefits? Fiscal benefits refer to tax exemptions, deductions, reduced rates, and other provisions that lower the tax burden for certain individuals or groups.
- Why are fiscal benefits considered regressive? Fiscal benefits disproportionately benefit higher-income individuals, exacerbating income inequality.
- What is the zero-rate on food and medicine? The zero-rate on food and medicine is a tax exemption policy that reduces the Value Added Tax (IVA) to 0% for these essential goods, intended to make them more affordable.
- Who are the main critics of current fiscal benefits? Critics include organizations like Oxfam Mexico and research institutions such as Mexico Evalúa, which advocate for a more equitable tax system.
