Sheinbaum Begins Her Term with Improved Tax Revenues and Decline in Oil Earnings

In October 2024, during the first month of the new administration of President Claudia Sheinbaum, oil revenues dropped by 59% compared to the same month in the previous year, while tax revenues increased by 6%, according to the latest monthly report on finances and public debt from the Ministry of Finance and Public Credit (SHCP). Despite the fact that tax revenue was 15.2 times higher than oil revenues, it failed to compensate for what the public sector receives from the exploitation, sale, and export of oil. Additionally, among the taxes, the Value Added Tax (VAT) saw a decline of 11.8% in October 2024 compared to the same month in 2023, although revenues from the Income Tax (ISR) grew by 6.2%.

More Taxes Increase in Import Taxes

Therefore, the total budget revenues reported a negative balance of 3.8% in real annual terms. Although tax collection rose by 23.2% in October 2023, it only grew by 6.1% in October 2024. The 59% drop in oil revenue is the highest since the 51.1% decrease in October 2020. Sheinbaum's government started with 89% of tax revenues contributing to total public income, the second-highest figure since October 2020; however, oil revenues were only at 5.8%, the lowest figure since 6% in 2020. In its October report, the Ministry attributed the growth in tax revenues to efforts to improve collection efficiency. Among the first measures of Sheinbaum's administration, on October 3, the tax agency (SAT) implemented simplifications and digitalization of procedures. Out of the 12 procedures, nine can now be completed digitally, which has allowed for quicker service to taxpayers in offices. According to the Ministry, from January to October, tax revenues grew by 5.3% in real annual terms, marking the second highest growth since 2016, driven by strong economic activity and collection efforts. During the same period, "the solid performance of private consumption allowed VAT collection to increase by 2.3% in real terms compared to January-October 2023, contributing 12.4% to the total growth in collection. Meanwhile, ISR revenues increased by 1.5% in real annual terms during the same period, supported by the 6.2% real growth observed in October," the Ministry clarified. Total collection from the Special Tax on Products and Services (IEPS) rose by 33% in real terms compared to January-October 2023, thanks to increased revenue from fuels, which grew by 65.3% in real terms. From January to October, import tax collection rose by 31.7% in real annual terms due to the implementation of tariffs in certain sectors and against countries without trade agreements. This category contributed 13.1% to revenue growth, exceeding forecasts by 28 billion pesos. Non-tax revenues showed a real annual decrease of 1.6% compared to January-October 2023, due to lower fees and products, but were still above the program by 66 billion pesos. Oil revenues decreased by 12.4% in real annual terms from January to October, resulting from lower crude production and lower natural gas prices. Despite this, Pemex revenues, which accounted for 84% of total oil revenues, rose by 10.1% in real terms due to measures taken to improve the company's operations. Cumulatively, until October, revenues from IMSS, ISSSTE, and CFE also showed increases of 7.3%, 5.1%, and 1.6% in real annual terms, collectively exceeding the expected figures by 91 billion pesos.

Although solid tax revenues are a positive sign for the Mexican economy, the reliance on oil revenues and their steep decline poses a significant challenge. Diversifying income sources and improving tax efficiency are essential for ensuring long-term financial stability, especially in a volatile global context.