The Health Crisis that Triggered the Tax
By 2012, Mexico was facing a public health catastrophe, with an alarming number of citizens struggling with overweight and obesity. The link between high sugar-sweetened beverage (SSB) consumption and chronic diseases like diabetes was undeniable, with sugary drinks providing up to 70% of the added sugars in the average Mexican's diet. In response, a coalition of non-governmental organizations (NGOs) and public health experts successfully campaigned for fiscal measures to address the problem, despite strong resistance from the soft drink industry. The Mexican government ultimately recognized the urgency of the situation, leading to the creation of the Special Tax on Production and Services (IEPS) on sugary beverages as a pivotal public health initiative.
How the Tax was Implemented
On January 1, 2014, the initial tax took effect, with a rate of 1 peso per liter applied to all non-alcoholic, non-dairy beverages with added sugar. This volumetric approach meant the tax was levied on the volume of the product, not its price. For consumers, this translated to a price increase of approximately 10% on average. The measure was part of a broader strategy that also included an 8% sales tax on high-calorie, non-essential foods with low nutritional value, such as snacks and confectionery.
Types of beverages subject to the tax have included:
- Carbonated soft drinks
- Flavored water
- Energy drinks
- Concentrates, powders, and syrups used to make sugary beverages
- Juice beverages with added sugar
Measuring the Impact: Consumer Behavior and Health Outcomes
Research has shown that the tax has significantly altered consumer behavior. A study covering the first year of implementation revealed an average 6% decline in purchases of taxed beverages, accelerating to 12% by December 2014. This trend continued, with a reported 37% reduction in volume purchased by 2016 compared to pre-tax levels.
Interestingly, the impact was not uniform across all socioeconomic groups. Studies consistently showed that lower-income households, who were more price-sensitive and typically consumed more SSBs, experienced the most significant reduction in purchases. The data also showed a corresponding increase in the purchase of untaxed alternatives, primarily bottled plain water. Beyond changes in consumption patterns, modeling studies suggest potential long-term health benefits, projecting a reduction in obesity and diabetes cases over time.
The Debate and Ongoing Evaluation
Despite evidence of the tax's effectiveness in reducing SSB consumption, the policy has faced criticism and prompted ongoing debate. The soft drink industry, for instance, funded studies attempting to undermine the tax, claiming it disproportionately hurt the poorest and had no real health benefit. However, these studies were not peer-reviewed and were used as part of a global lobbying campaign against similar taxes. Critics also point to the fact that not all tax revenue was initially allocated to public health initiatives, though recent government announcements promise to dedicate all future revenue to the healthcare system.
A Comparative Look: Mexico vs. The UK
Mexico's tax stands out for its straightforward volumetric structure, while other nations have adopted different approaches. Comparing Mexico's model with the United Kingdom's Soft Drinks Industry Levy (SDIL) offers insights into alternative strategies.
| Feature | Mexico's Sugar Tax (IEPS) | United Kingdom's Soft Drinks Industry Levy (SDIL) |
|---|---|---|
| Implementation Year | 2014 | 2018 |
| Tax Instrument | Specific excise tax based on volume | Specific excise tax, tiered based on sugar content |
| Tax Rate (Current) | 1.64 MXN/liter (as of 2025), rising to 3.08 MXN/liter in 2026 | £0.18/liter (5-8g sugar/100ml) or £0.24/liter (>8g sugar/100ml) |
| Primary Impact | Reduced consumption, especially among low-income groups | Widespread product reformulation to reduce sugar levels |
| Recent Changes | Announced rate increase and inclusion of artificially sweetened drinks for 2026 | Rate structure largely stable, but has spurred significant industry reformulation |
Recent Developments and the Future Outlook
In a significant move in September 2025, the Mexican government, under President Claudia Sheinbaum, announced a new tax hike set to take effect in 2026. The tax rate will nearly double, increasing from 1.64 pesos to 3.08 pesos per liter. Notably, this new iteration of the tax will, for the first time, apply to artificially sweetened drinks that contain no sugar. This move signals a more aggressive stance, targeting the consumption of all sweetened beverages, regardless of sugar content. The government expects to raise approximately $2.2 billion from this tax in 2026, with all proceeds explicitly earmarked for the healthcare budget to treat illnesses linked to excessive sugar consumption.
Conclusion: A Long-Term Prescription
The Mexican sugar tax stands as a prominent global example of a fiscal policy used as a public health tool. While its initial implementation in 2014 successfully reduced consumption of sugary drinks, particularly among the most vulnerable populations, its long-term health impact remains a subject of ongoing research and debate. The recent escalation of the tax and its expansion to include artificially sweetened beverages demonstrates the government's continued commitment to tackling the country's public health crisis aggressively. The evolution of the policy, from its initial rollout to the recent comprehensive update, offers valuable lessons for other nations considering similar health-focused tax initiatives.
