Modernization of the tax payment scheme for producers of artisanal alcoholic beverages will once again be in the hands of the legislature. With this change, producers and some senators project that there will be more competition, and they will grow in market share.
The initiative, which senators presented in December 2020, seeks to update the payment scheme of the Special Tax on Production and Services (IEPS) so that it is not calculated by the final price of the product (Ad Valorem), but by the degree of alcohol containing each bottled drink (Ad Quantum).
For example, under the current scheme, craft brewers pay 26.5% on the final price of beer. With the update, the Asociación Cervecera Mexicana (Acermex) projects that the payment will be reduced to 1.4 pesos per degree of alcohol.
Legislators and producers point out that of the countries that make up the Organization for Economic Development Cooperation (OECD), only Mexico, Chile, South Korea and Israel collect the Ad Valorem tax.
Gerardo Novelo, senator of the Morena bench and one of the promoters of the initiative, explains that with the change they intend for small producers to have an “even floor” to compete with large companies that produce wines, spirits and beers in an industrialized way.
The legislator details that, by taxing the alcohol content and not the price, small producers can have a greater flow of capital to invest in their operations and not in administrative matters. There is also a tax benefit, since the treasury would obtain an additional collection of 20,000 million pesos, without the need to increase taxes, since it closes the informal market for those who falsify invoices or sell illicit drinks.
“This measure benefits craft beer, wines, tequila and other distillates, since the current system is not fair for producers because this high current tax burden does not allow them to be more productive and competitive in the market, for the On the contrary, it affects the entire value chain ”, declares the morenista.
Cristina Barba Favá, director of Acermex, declares that craft beer has a market share of 0.84%, with an annual growth of 7.5%, however, with the change in the modernization of the scheme, this percentage could rise to that of markets such as the American, which is 13.6% per year.
The representative of the craft brewers believes that if this initiative is accepted, it will allow them to enter the market with fair and competitive prices, while new sales channels will be opened since now their cost is higher compared to industrialized beverages.
“This issue is not for those who benefit, it is to create a level floor,” says Barba about the controversy that the proposal faces in the face of questions that it only favors craft brewers. “For us it is the issue and we support this initiative to enter the market with fair and competitive prices,” he points out.
Boost to the production chain
During the workshops that have been held in the Senate of the Republic, some producers and representatives of business organizations have exposed the benefits that modernization will bring in the payment of the tax, as happened on May 5.
In the forum, Hipócrates Nolasco, president of the Mezcal Regulatory Council (CRM), who believes that the 954 communities that depend on the production of this distillate in Mexico would be favored since four wages are generated for the production of 100 liters of the product (the amount of money that a worker earns for each day of work), against what an industrialized distillate factory pays that is only one for the production of 10,000 liters.
José de Lucas, general director of the Association of Importers and Representatives of Food and Beverages (Airabac), declares that the current scheme encourages illegality that generates losses for the Treasury of 8,500 million pesos. Iñaki Landáburu, president of the National Association of Wine and Liquor Distributors (ANDIVYL), believes that 43% of alcoholic beverages that are sold pay an IEPS that does not correspond to them.
“This initiative has high support from the majority of Mexican producers of alcoholic beverages, except for two industries, but they are foreign, which I believe, I am convinced that it does not harm them at all,” specifies Novelo.
