Fiscal gap of 43 thousand million pesos… and counting – El Financiero

One of the main risks to the sustainability of Mexico’s public finances is the fiscal stimulus policy to contain the prices of automotive fuels.

In the first quarter of this year the IEPS collection of gasoline and diesel fell below of the income programmed in the Federal Income Law for that period in 43 thousand 462 million pesos.

This amount represents a revenue loss in public finances for the application of the fiscal stimulus regarding IEPS.

The IEPS fuel collection in January-March 2022 was 20 thousand 784 million pesos, according to preliminary information from the Ministry of Finance.

However, the estimated amount in the Income Law for that period was 64 thousand 246 million pesos.

As a reference, in the first quarter of 2021 the IEPS collection that was charged to gasoline and diesel was 66 thousand 104 million pesos.

The annual comparison shows a drop of 70.7 percent in real terms. That is the cost of public fuel prices not becoming an additional inflationary pressure.

In the quarterly report on public finances released this Friday, the Treasury recognizes the impact of the increase in gasoline prices on public finances:

“… in order to avoid an inflationary rebound caused by the international increase in fuel prices, the federal government granted additional fiscal stimuli to the IEPS during the (first) quarter, which reduced the collection charged on gasoline and diesel. in 43 thousand 462 million pesos with respect to January-March 2021″.

Gasoline prices have been contained by fiscal stimuli, policy thatAccording to Treasury, has not implied a deterioration in public finances.

When presenting the report, the Undersecretary of Finance, Gabriel Yorio, stated that public revenues in the first quarter of the year are in line with what was programmed and authorized by Congress.

This “implies that there will be no spending cuts and no deviations from the (tax) collection path that is being taken”, which has shown resilience, despite the consequences of the effects caused by the pandemic and the effects of the conflict between Russia and Ukraine.

According to the official, the IEPS fuel stimuli have prevented inflation in Mexico from rising two points above its current level.

Excess oil revenues from higher international oil prices finance the high cost to public finances of fiscal stimuli.

However, to the extent that oil surpluses tend to decrease, the margin of government Mexican to keep the price of gasoline and diesel limited can be limited.

The Undersecretary of the Treasury emphasized that “the decision has been made not to transfer the cost to the citizens and, as everyone knows, an additional incentive was activated, in addition to the stimulus for the IEPS on gasoline to keep the price of fuel not only stable, but in the inflationary path that the government has established”.

Indeed, since March the government established 100 percent of the weekly fiscal stimulus in terms of the IEPS for magna or regular gasoline -the one with the highest consumption-, premium and diesel.

Additionally, it began to grant a complementary stimulus on ISR and VAT for fuel producers and importers who sell first-hand in the country.

Although gasoline prices have been contained by additional fiscal stimuli, this policy is opening a hole in public finances via IEPS.

only in march the effect of the greater stimuli was manifested in a plunge of 91.7 percent in that tax component with respect to what was collected in the same month of 2021.

Maintaining sustainable public finances will largely depend on economic activity in Mexico fully recovering its pre-pandemic level, which is still uphill.