Global tension over the conflict between Russia and Ukraine has increased oil prices internationally. Last week the prices of Brent, WTI and the Mexican mix exceeded 100, 96 and 90 dollars, respectively.
Although governments can obtain more oil revenues due to the tension in Europe, in the case of Mexico the government of Andrés Manuel López Obrador has said – since his campaign for the Presidency – that the price of gasoline would not rise beyond inflation. .
To this end, in a scenario of high crude oil prices, the fiscal incentive to the Special Tax on Production and Services (IEPS) is used and thus prevent the consumer from paying more for fuel.
However, if the upward trend in international crude oil prices continues, the government would have to continue with the 100% fiscal stimulus (at least for Magna), which, according to experts, would become a “subsidy ” of the IEPS in gasoline given that the treasury would have a negative collection in this tax.
The last time the federal government had to give a “de facto subsidy” to IEPS tax collection was in 2014, due to the increase in the price of a barrel of oil.
In the “Report on the Result of the Higher Audit of the Public Account 2014” it was detailed that in that year oil revenues were lower by 4.2% in real annual terms, among other reasons, because the final consumer was transferred 50,149 million pesos reais for the IEPS subsidy on gasoline and diesel.
This happened because the average retail price of said fuels was lower than Pemex’s producer price, which meant that the tax rate was negative, they explained.
“It is not known if it will be applied again, but there is the precedent and that possibility exists,” said Adrián García Gómez, coordinator of income and taxes at the Center for Economic and Budgetary Research (CIEP).
García Gómez added that it is both an interesting and complex issue because the federal administration would enter into a dilemma. “The government applies the subsidy or lets the price of gasoline rise, both have different costs and what is best for public finances would have to be assessed.”
For the week of February 26 to March 4, the fiscal stimulus for Magna gasoline is 99.10%; was reduced, since the previous week it reached, for the first time, 100% in low-octane gasoline. For Premium gasoline and diesel, the stimulus is 77.46 and 78.64%, which also registered falls due to the fact that in the previous week the government authorized the stimuli of 82.75 and 88.46%, respectively.