The cigarette consumption tax in Mexico is below that of Latin American countries that apply higher tax rates to discourage tobacco use, according to the Organization for Economic Co-operation and Development (OECD). Currently, in Mexico, an average tax burden of four dollars, equivalent to 80 Mexican pesos, is applied for each pack of 20 cigarettes sold legally. This figure includes the taxes collected by the Mexican Tax Administration Service (SAT) on the factory price of tobacco and at the final consumer through the Special Tax on Production and Services (IEPS).
According to the OECD, in 2024 the initial price of an average pack after leaving the factory is 28.84 pesos, but the consumer pays an additional 46.16 pesos solely for the IEPS, raising the final cost to an average of 75 pesos. To align with the countries in the region that impose higher tobacco taxes, the OECD recommends that the SAT increase the tax rate by at least half a dollar.
The OECD also pointed out that Mexico is lagging in terms of revenue collection from tobacco sales. The tax revenues obtained from the legal sale of cigarettes represent less than 0.20% of the national Gross Domestic Product (GDP), and when comparing total collection, tobacco tax revenues amount to 1.20%. Chile, Argentina, and Jamaica are the countries in the region with the highest cigarette tax rates.
The OECD report highlights that Mexico and other Latin American countries have the opportunity to increase revenues through higher tobacco taxes. Raising these taxes could help combat the high levels of smokers and smoking-related deaths in the region. In 2021, more than 350,000 people in Latin America died due to tobacco consumption and exposure to secondhand smoke, and more than 40% of respiratory cancer cases were attributed to smoking.
