Income elasticity of the main taxes in Mexico and fiscal loss during the COVID-19 pandemic

Juan Hernández (), Daniel Ventosa-Santaulària () and Brian Roque ()
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Juan Hernández: CIDE and Banco de México
Daniel Ventosa-Santaulària: CIDE
Brian Roque: CIDE

Economics Bulletin, 2025, vol. 45, issue 1, 586 - 594

Abstract: We estimate the income elasticity of Mexico's value-added, income and total taxes. Our findings reveal that the elasticity of these taxes is greater than one, indicating a responsive tax system to economic fluctuations. These results confirm the countercyclycal role of the tax system and underscore the growing importance of non-oil tax revenue in maintaining fiscal stability. A counterfactual analysis to assess the revenue losses attributable to the COVID-19 pandemic, offers insights on the resilience of Mexico's tax system to economic shocks.

Keywords: Income elasticity of taxes; Mexico; Emerging Economy; Covid-19 pandemic; ARDL; cointegration (search for similar items in EconPapers)
JEL-codes: E6 H2 (search for similar items in EconPapers)
Date: 2025-03-30
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