Valued-Added Tax Revenues in Mexico: An Empirical Analysis

José A. Tijerina-Guajardo and José A. Pagán
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José A. Tijerina-Guajardo: Universidad Autónoma de Nuevo León
José A. Pagán: University of Texas-Pan American

Public Finance Review, 2000, vol. 28, issue 6, 561-575

Abstract: This article analyzes the effect of changes in the valued-added tax (VAT) rate on real VAT revenue in Mexico. Recently, there has been a heated debate on the optimal VAT system and the potential economic impact of a reduction in the VAT rate in the country. The results from estimating a VAT revenue model suggest that there seems to be a positive relationship between VAT revenue and the tax rate around the actual VAT rate, contrary to the assertion that there is a Laffer curve for the VAT in Mexico. A 1 percentage point change in the VAT rate results in a 2.4% change in real VAT revenues. Leaving aside other fiscal reform considerations, the results appear to be robust to alternative empirical specifications.

Date: 2000
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Persistent link: https://EconPapers.repec.org/RePEc:sae:pubfin:v:28:y:2000:i:6:p:561-575

DOI: 10.1177/109114210002800604

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