The Treasury Benefits from IEPS Collection, Despite the Limit on Magna Gasoline Prices

The Ministry of Finance plans to achieve a revenue of 434.859 billion pesos by 2025 through the Special Tax on Production and Services (IEPS) that applies to fuels, despite a limit of 24 pesos for Magna gasoline. On February 27th, the Government of Mexico and gas station owners signed an agreement to voluntarily set the price of Magna gasoline. This agreement will be in effect for six months and will be evaluated afterward, potentially undergoing modifications. It was determined that gas stations can have a maximum profit of two pesos, excluding VAT, which will help maintain the agreed price. This price takes into account the profit margin, as well as the IEPS and VAT taxes and the cost of fuel, including distribution and transportation costs, as explained by Ramses Pech, an analyst in the Energy and Economic sectors at Caraiva and Asociados-León & Pech Architects.

The agreement also states that the Ministry of Finance and Public Credit (SHCP) will continue providing tax incentives and cuts to the IEPS to mitigate the impact of rising international prices. However, in the last two weeks since the agreement was signed, the Treasury has reduced these supports, which also contributes to a higher IEPS collection. It is expected that oil prices will start to decline, giving the Treasury more room to increase IEPS collection, meaning reducing tax incentives and boosting revenue, explained Arturo Carranza, project director of Energy at Akza Advisors. On March 5th, oil prices dropped to levels not seen in over three years, driven by investor concerns about OPEC+'s intentions to increase production in April and tariffs imposed on Canada, China, and Mexico. “In this situation, gas stations will have to sacrifice part of their profit margins due to international oil prices and expectations for fuels. This implies limited profits for gas station owners and lower prices, giving the Treasury ample space to apply the IEPS charge,” Carranza specified. In the last two years, crude oil prices have allowed the Treasury to achieve quite positive revenue from this tax; from 2023 to 2024, revenue doubled due to cuts in incentives for gasoline and diesel. “For 2025, the IEPS collection formula for gasoline will not change, so it seems feasible to reach the goal of over 400 billion pesos for this year; the critical aspect will be to observe how committed gas station owners are to the agreement since it is optional,” considered the specialist from Caraiva and Asociados-León & Pech Architects. Information from Reuters.

This panorama shows us how the energy market interrelates with the country's fiscal policies. As fuel prices fluctuate, the Treasury appears to have an effective mechanism to maximize IEPS collection, which may put pressure on gas stations but also reflects a strategy for greater economic control in uncertain times. It is vital to closely monitor these trends to anticipate impacts on the domestic economy and citizens' purchasing power.