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Tax reform in Mexico: a general equilibrium assessment

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  • Horacio Sobarzo

Abstract

This article reports the results of an Applied General Equilibrium Model (AGEM) built to simulate a recent fiscal reform initiative of the Mexican government. Treating public revenues as endogenous and tax rates as exogenous variables, the model explicitly incorporates both the tax structure and the oil-exporting sector as important sources of government revenues. The results confirm that the fiscal problem in Mexico lies in the low degree of tax compliance. By simulating the reform starting in the year 2008, the results suggest that consumption taxes are not necessarily the unique solution to the tax collection process in a developing country like Mexico.

Suggested Citation

  • Horacio Sobarzo, 2011. "Tax reform in Mexico: a general equilibrium assessment," Applied Economics Letters, Taylor & Francis Journals, vol. 18(7), pages 671-678.
    • Handle: RePEc:taf:apeclt:v:18:y:2011:i:7:p:671-678
    DOI: 10.1080/13504851.2010.483999
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    References listed on IDEAS

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    1. Ahmad,Etisham & Stern,Nicholas, 1991. "The Theory and Practice of Tax Reform in Developing Countries," Cambridge Books, Cambridge University Press, number 9780521265638.
    2. Devarajan, Shantayanan & Lewis, Jeffrey & Robinson, Sherman, 1986. "A Bibliography of Computable General Equilibrium (CGE) Models Applied to Developing Countries," CUDARE Working Papers 198339, University of California, Berkeley, Department of Agricultural and Resource Economics.
    3. Ballard, Charles L. & Fullerton, Don & Shoven, John B. & Whalley, John, 2009. "A General Equilibrium Model for Tax Policy Evaluation," National Bureau of Economic Research Books, University of Chicago Press, number 9780226036335, December.
    4. Charles L. Ballard & Don Fullerton & John B. Shoven & John Whalley, 1985. "Introduction to "A General Equilibrium Model for Tax Policy Evaluation"," NBER Chapters, in: A General Equilibrium Model for Tax Policy Evaluation, pages 1-5, National Bureau of Economic Research, Inc.
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