Due to tax benefits and deductions, the Treasury will forgo collecting nearly 4.4% of GDP.

This year, the federal government will experience a higher level of tax forfeitures than in 2024, in a year in which it seeks to achieve fiscal consolidation through increased revenue and cuts in public spending.

The 2025 Tax Waivers document, prepared by the Ministry of Finance and Public Credit (SHCP), shows that this year's fiscal expenditures—deductions, reduced rates, incentives, presidential decrees, and other tax benefits—will represent 4.39% of the Gross Domestic Product (GDP), equivalent to 1 trillion 579,748 million pesos.

The level projected for this year is higher than that of 2024, when the Treasury estimated revenue losses of 4.2% of GDP.

While the document contains estimates of the lost revenue due to preferential tax treatments, the SHCP emphasized that the total sum does not represent an equivalent estimate of the additional revenue that would be obtained if all treatments were eliminated.

"This is because the estimate of the amount corresponding to each treatment assumes that the rest of the treatments remain unchanged and that taxpayer behavior does not vary (...) possible interactions between different treatments, changes in taxpayer behavior, and general equilibrium effects are excluded."

In detail, it can be seen that VAT continues to be the government's largest fiscal expenditure, primarily due to the zero rate on food and medicines, as well as other reduced rates.

VAT, the largest fiscal expenditure

In total, it is estimated that 653.759 billion pesos will be lost from VAT this year, representing 1.82% of GDP.

This was followed by personal income tax, where personal income tax deductions will result in the loss of approximately 384.9 billion pesos in taxes, 1.07% of GDP. In the case of corporate income tax, the loss totaled 149.99 billion pesos, 0.42% of GDP.

In the case of the IEPS, fiscal spending this year was projected at 19.208 billion pesos, or 0.05% of GDP, and presidential decrees have raised the amount to 371.882 billion pesos, or 1.03% of GDP.

Regressive

According to analysts, fiscal incentives are generally regressive, as most benefit people in the highest deciles, which is why they have pointed out the need to review them.

Jorge Cano, coordinator of the Public Spending and Accountability Program at México Evalúa, indicated that, for example, personal income tax deductions typically benefit wealthier families, while there are questions about who benefits most from the zero tax rate.

"All the benefits are concentrated in the upper decile. It's regressive not only because it's unevenly distributed, but by design," added Carlos Brown, Program Director at Oxfam Mexico.