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Revenue Elasticity of the Main federal Taxes in Mexico

Felipe Fonseca () and Daniel Ventosa-Santaulària ()

Latin American Journal of Economics-formerly Cuadernos de Economía, 2011, vol. 48, issue 1, 89-111

Abstract: An inelastic tax system increases the uncertainty associated with tax revenue collection. This results in continuous short-term adjustments to maintain the stability of tax collection. In this paper, we estimate the revenue elasticity of the principal taxes in Mexico, finding a much greater elasticity than that found in previous studies. A cointegration model between the revenue and taxes is used which satisfies strong exogeneity, providing a basis for congruent and reliable projections. Using this model, the tax revenue projected for 2011 is much lower than the estimates prepared by Mexico’s federal government.

Keywords: Federal taxes; long-term revenue elasticity; cointegration; strong exogeneity; forecasts (search for similar items in EconPapers)
JEL-codes: C22 E62 H24 (search for similar items in EconPapers)
Date: 2011
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Latin American Journal of Economics-formerly Cuadernos de Economía is currently edited by Raimundo Soto

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