This month, Mexico’s Secretariat of Finance and Public Credit proposed sweeping tax increases on products deemed harmful or unhealthy. This proposal includes significant tax hikes on tobacco products, as part of a broader “healthy tax” initiative introduced within the 2026 Economic Package.

According to the initial proposed text, the Special Tax on Production and Services (IEPS) applied to tobacco products would increase by 200 percent by 2030. The plan also introduces new per-cigarette quotas, higher value-added tax (VAT) on premium cigars, and additional reporting requirements for manufacturers. Taxes on other tobacco products like nicotine pouches and electronic cigarettes would be introduced for the first time. For the new products, the proposal introduces a new form of tax calculation that ties it to the product’s nicotine content.

The Finance Ministry stated that the goal is to curb harmful consumption, modernize fiscal policy, and increase revenue for public health and social programs. According to official projections, the package could generate an additional 140 billion pesos (approximately $757 million) annually.

While tobacco is a central focus of the package, the proposal also extends to other sectors. The IEPS on sugary drinks would nearly double, new taxes would apply to junk food and fast food, and an 8 percent levy would be imposed on violent or adult video games. Taxes on betting and gambling would rise from 30 percent to 50 percent.

In terms of next steps, the legislative process requires the lower house to approve the income law by October 20, followed by Senate review by October 31, with the final budget due by November 15. If enacted, the new taxes would take effect in 2026.

For premium cigars, the measure represents a direct tax increase that will add to costs for producers and importers serving the Mexican market as well as consumers. More troubling, however, is that the proposal aligns closely with the policy framework by the World Health Organization’s Framework Convention on Tobacco Control (FCTC), which calls for higher excise taxes, advertising restrictions, and reduced product availability across all tobacco categories without product distinction. This proposal marks another step toward a more restrictive regulatory environment in Mexico, which had already tightened tobacco controls in recent years under former President López-Obrador. President Sheinbaum has prioritized expanding social spending and promoting “healthier lifestyles,” signalling that this might just be the start of more scrutiny of premium cigars and tobacco products writ large.

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