Gasoline, fiscal stimulus: the cost


This week the Mexican government will stop collecting the IPES on gasoline and will apply a complementary stimulus creditable with the Income Tax and the Value Added Tax. How much will it cost? How big will the gap be in public finances?

The director of the IMCO, Valeria Moy, estimates that this week the Mexican government will stop collecting 10.45 billion pesos from IEPS and complementary stimulus. To give that amount a dimension, she referred (on the radio program Así Las Cosas) that the budget for full-time schools, recently canceled, 12,000 million pesos were allocated.

This is a partial calculation and it is only for this week that the fiscal stimulus will be applied 100% to magna, premium and diesel gasoline. But what would be the cost in the long term? The director of analysis at Banco Base, Gabriela Siller, calculates that if the additional stimulus is maintained for the rest of the year, the cost for the Ministry of Finance and Public Credit would be 330,000 million pesos. .

That amount is equivalent to 5.36% of the 2022 budget revenue or 1.26% of the 2021 Gross Domestic Product. These are calculations by specialists in the private sector. When they asked the Secretary of the Treasury, Rogelio Ramírez de la O, how much the government schemes would cost to “soften” the price of gasoline for the final consumer, he replied: “I don’t know; What I can tell you is that there is a cushion for extra oil income; it will cost but we are covered”.

The person in charge of public finances explained that there is a “natural hedge”: when the price of oil is high –and therefore the price of gasoline– IEPS collection is reduced by fiscal stimuli, contrary to when the The price of gasoline is low. He said it on March 4 just when he announced an extra fiscal stimulus to soften the rise in gasoline prices.

The new scheme was put into operation in the world context in which tensions began to increase due to Russia’s invasion of Ukraine and the consequent wave of inflation.

It is very likely that the official preferred not to make any public calculations about the cost that these schemes will have to soften the price of gasoline for final consumers, because the cost will depend on the duration of the conflict and, consequently, the volatility in the price of oil and the gasolines.

However, the partial and total calculations of private analysts clearly show that the amount of what the Mexican government will stop collecting will be very high. It is what it will cost to avoid the “gasolinazo” or the increase in the price of gasoline .

The government absorbs the 5.49 pesos per liter of IEPS that consumers pay for “green” gasoline, the 4.63 pesos that correspond to “red” gasoline and the 6.03 pesos per liter for diesel.

Since last week, the Treasury reported that it would cover the taxes on regular gasoline and diesel at 100 percent. So far this year, it is the third time that the fiscal stimulus for magna gasoline is 100%. On Friday of last week, Hacienda added to the Premium, which rose from 97.14 to 100% support.

In addition to granting the IEPS at 100%, the government will grant complementary stimuli of 3.87 pesos per liter of ‘green’ gasoline; 2.74 pesos per liter of ‘red’ gasoline; and 5.23 pesos per liter of diesel. The decree with the additional stimulus will be in force until December 31, 2024.

The gasoline subsidy, in the current government, has been promoted as a policy that benefits the people. However, economic experts consider that it is a regressive subsidy because it benefits the richest.

The government could be more effective in redistributing wealth if it charged gasoline at the real price and allocated those resources to targeted social programs.

At the time

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Marco A. Mares

Journalist

Rich and Powerful

He has worked continuously in newspapers, magazines, radio, television and the Internet, in the last 31 years he has specialized in business, finance and economics. He is one of the three hosts of the program Alebrijes, Águila o Sol, a program specialized in economic issues that is broadcast on Foro TV.



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