Mexico’s 1980 Value-Added Tax: Political, Economic, and Cultural History of a Consumer Society

This paper analyzes Mexico’s Value-Added Tax, which came into effect in 1980, as a key moment in the changing consumer society of the 1970s and 1980s.  Consumers, merchants, and policymakers had to navigate new economic phenomena, including inflation, consumer credit, peso devaluations, consumer rights, and the new tax.  The tax levied 10 percent on consumer goods, added to the retail price at the point of purchase.  It replaced older taxes, and was part of a broader project of fiscal modernization.  Two principal goals of fiscal modernization were to increase public revenue and to foster a culture of fiscal responsibility among citizens.  In theory, consumers would pay less total tax, but, importantly, they became more aware of the taxes they paid (the older taxes had been buried in the retail price). The new tax thus constituted a major change in the relationships between Mexico’s one-party state, consumers, and merchants.

The paper examines the political fallout, on the Left and the Right, as consumers and small businesspeople worried how the tax would impact their budgets.  By 1985, their protests forced the Ministry of the Treasury to make a major change: to bury the tax in the retail price, which successfully lowered public protest.  Overall, the new tax did increase public revenue, and can be considered a victory for the government.  But by burying the tax in the retail price, Treasury reinforced a lack of fiscal consciousness on part of consumers—a failure in terms of the broader goal of changing fiscal culture.

This paper demonstrates how combining political, economic, and cultural methods and sources—political analysis of protests and social movements, quantitative analysis of public revenue data, and cultural analysis of government propaganda—is crucial for reconstructing an everyday history of consumption, economic instability, and the policies of Mexico’s one-party state.