Mexico tobacco industry opposes proposed 8% cigarette tax hike

The Mexican tobacco industry is urging the Ministry of Finance to cancel a proposed 8% tax increase on cigarettes for 2027. Gastón Zambrano Margain, president of the National Council of the Tobacco Industry (CONAINTA), argued that high taxes have failed to reduce smoking rates or combat smuggling and piracy.

Industry representatives claim that current tax policies have inadvertently fueled organized crime and the illegal market. Estimates regarding fiscal losses due to illegal cigarette trade vary: CONAINTA projects an annual tax evasion of approximately 23 billion pesos, while studies from the National Polytechnic Institute (IPN) suggest losses could reach 26.7 billion pesos. Other analyses, including one by KPMG, estimate the impact on the tax authority (SAT) could be as high as 24 billion pesos by 2025.

Industry experts note that because demand for tobacco is inelastic, price hikes driven by the Special Tax on Production and Services (IEPS) have not significantly increased revenue as intended, but have instead pushed consumers toward the illicit market, which currently accounts for an estimated 23% to 28% of national consumption.