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Mexico’s Chamber of Deputies has ratified significant changes to the Special Tax on Production and Services (IEPS), increasing the tax charges for online gaming, soft drinks, cigarettes, violent video games, and fuel. The legislation was approved by 351 votes, 129 against, and one abstention, one of the most debated budgetary reforms in recent memory.
The bill, whose advancement has been spearheaded by the Ministry of Finance, intends to strengthen federal revenues and public health matters regarding certain products. Through these reforms, the administration is projecting to receive MXN 761.5 billion in 2026, a 10% rise compared to anticipated revenues for 2025. The bill is now moving to the Senate after legislators reviewed over 200 reservations in its specific articles.
Tax Impact on Online Gambling
Among the most impactful changes is the increase in the tax rate on games of chance and online gambling from 30% to 50%. This adjustment aims to increase taxes for the rapidly expanding online gambling market, which has seen explosive growth throughout recent years.
However, authorities warned that the high increase would have the contrary effect. Legal and tax analysts interviewed by Milenio indicate the Tax Administration Service (SAT) could lose up to MXN 12 billion in potential income if the increased tax drives players and operators into the informal sector.
They argue that a rise in the IEPS will deter compliance by licensed operators and push clients onto illegal or unregulated websites, which already represent a substantial proportion of Mexico’s gaming market.
The Expanding Shadow Market
Estimates place 60% of Mexico’s online gambling market currently beyond legal control. Approximately 1,000 illegal gambling websites are said to be available to Mexican consumers, providing unregulated, untaxed, and unsupported best practices for responsible gaming.
The critics fear that the higher tax levy will widen the gap between regulated and illegal operations and weaken the government’s initiative to establish a transparent and accountable iGaming industry. When higher taxes prove challenging for licensed operators to bear, unlicensed platforms can gain popularity by charging less and offering unregulated services.
Their fiscal law experts noted that “raising the tax would force legally installed operators to rethink their business models“, becoming less competitive compared to illegal operators.
Public Health and “Sin Tax” Debate
The reform also proposes levying an 8% tax on video games with violent content, in keeping with a broader push toward so-called “health taxes.” A portion of the revenue they raise will be used for healthcare programs, according to the Ministry of Finance.
The proponents of the reform say that not only will the increased taxes enhance fiscal capacity, but also improve healthier consumption habits. Critics, however, caution that the initiative will have harmful effects on household economies, particularly on low-income households, without necessarily resulting in the expected benefits in terms of public health.
A Delicate Balancing Act
The go-ahead of the IEPS reform testifies to the pressure of the Mexican state to diversify its sources of revenue and enhance fiscal authority over growing industries like internet gaming. Yet the move is a testament to the ongoing contradiction between public policy goals and market forces.
With the bill advancing to the Senate now, industry stakeholders in the gaming and internet entertainment sectors seek greater clarity on how the new tax regime will be applied, and whether it will strike the best possible balance among revenue generation, consumer protection, and market viability.
In a country where much online gambling still lies beyond the government’s grasp, the new IEPS increase may end up putting the authorities’ hand in attempting to stem illegality without stifling innovation and progress.
Source: YogoNet
