Concerns Rise as Mexico Proposes 10.5% Tax Increase on E-Commerce, Threatening SMEs and Investment Growth

Concerns Rise Over Proposed Tax Increase on Digital Companies in Mexico

Mexico City, [Date] — The Mexican government’s recent proposal to increase taxes on digitally operating companies has sparked significant concern among industry leaders, particularly from e-commerce giant Mercado Libre. The initiative, part of President Claudia Sheinbaum’s Economic Package for 2026, aims to impose a 10.5% tax on transactions made by corporate entities through digital marketplaces, which could have far-reaching implications for small and medium-sized enterprises (SMEs) and consumers alike.

The proposed tax structure includes a 2.5% Income Tax (ISR) and an 8% Value-Added Tax (IVA), which Mercado Libre warns could stifle e-commerce growth and lead to higher prices for consumers. Alejandra Orozco, Director of Government Relations at Mercado Libre, expressed her concerns, stating, “We are going to see two important phenomena: SMEs that stop selling online and prefer channels in the physical world, where there is no traceability, and an increase in prices as a response from other companies that sell with us.”

As the proposal is debated in the Chamber of Deputies, Mercado Libre stands as the only major company to publicly oppose the plan. The company argues that SMEs, which are vital to its operations, will bear the brunt of the tax increase due to their already limited profit margins and liquidity challenges. While the tax withholdings could eventually be recovered, the bureaucratic delays in refunds raise immediate cash flow concerns for these businesses.

In response to the proposal, Mercado Libre has suggested a more manageable retention rate of 1% for ISR and 2% for IVA, but Orozco noted that discussions with financial and legislative authorities have not yielded productive results. “If our sellers sell less, Mercado Libre sells less. And obviously, that has an impact even on the company’s investment plans,” she warned, referencing the company’s US$3.4 billion investment plan for its Mexican operations this year.

The government’s budget for the upcoming year relies on increased tax revenue without introducing new direct taxes on consumers. However, the anticipated tax hike is likely to be passed on to consumers, exacerbating inflationary pressures. A slowdown in e-commerce activity could also deter foreign direct investment, crucial for job creation and economic growth in Mexico, which is already the second-largest e-commerce market in Latin America.

The proposal has reignited tensions within the sector, particularly regarding competition with foreign companies that may not be subject to the same tax obligations. Local platforms argue that competitors like Temu and Shein, which ship directly from abroad, can offer lower prices due to their tax exemptions.

As the debate continues, the potential consequences of the proposed tax increase loom large over Mexico’s burgeoning digital economy, raising questions about the future of e-commerce and the sustainability of SMEs in an increasingly competitive landscape.