IDEAS home Printed from
MyIDEAS: Log in (now much improved!) to save this paper

Mexico: An Evaluation of the Main Features of the Tax System

Mexico's tax system is a paradox. The tax policy and tax administration reforms of the late 1980s and early 1990s delivered a tax structure that is in many ways comparable, if not superior, to that in many OECD countries. However, Mexico's tax system continues to perform in some fundamental ways, in particular in its ability to raise adequate revenues, worse than the tax system of many developing countries. The basic objective of this evaluation is to try to explain this paradox. In doing that we will compare the revenue performance of Mexico's tax system to that of other developing and developed countries and examine Mexico's tax system buoyancy and elasticity over time. The evaluation will also take stock of the recent performance of Mexico's tax system vis-a-vis other important objectives of any tax system. In particular, we will examine the vertical and horizontal distribution of tax burdens, the relative distortions or excess burdens introduced by the tax system in the decisions of economic agents, and its relative complexity and impact on tax administration and taxpayer compliance costs. The main objective of the evaluation is to identify the most important avenues for reform in tax policy, tax administration, and the political economy of tax reform in Mexico.The improvements in Mexico's tax structure have been many during the last 10 to 15 years. Examples in the area of income taxation include the practically full indexation of personal and enterprise profit tax for inflation, the full integration of these two taxes to avoid the double taxation of dividends, and the application of a minimum tax on gross assets, to which the enterprise profit tax is creditable, to combat tax evasion. The structures of the VAT and excise taxes are also on the whole quite adequate. While many nuisance taxes were eliminated, the standard tax rates for the main taxes are similar to or slightly below international averages. The effective marginal rates of taxation on new investment, as also reviewed below, have been found to be below those of most OECD and Latin American countries, thus creating a favorable atmosphere for domestic and foreign investment. And yet, with all these good characteristics, Mexico's tax system has not been able to generate much more that 10 to 11 percent of tax revenues in relation to GDP. The most important issue before proceeding with tax reform, especially if the most important objective is to increase the revenue adequacy of the system, is to explain what factors may account for this enduring low tax effort.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL:
Download Restriction: no

Paper provided by International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University in its series International Center for Public Policy Working Paper Series, at AYSPS, GSU with number paper0112.

in new window

Length: 56 pages
Date of creation: 01 Nov 2001
Handle: RePEc:ays:ispwps:paper0112
Contact details of provider: Phone: 404-413-0235
Fax: 404-413-0244
Web page:

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

in new window

  1. Ernesto Talvi & Carlos A. Vegh, 2000. "Tax Base Variability and Procyclical Fiscal Policy," NBER Working Papers 7499, National Bureau of Economic Research, Inc.
  2. Thomas Dalsgaard, 2000. "The Tax System in Mexico: A Need for Strengthening the Revenue-Raising Capacity," OECD Economics Department Working Papers 233, OECD Publishing.
  3. Michael Gavin & Roberto Perotti, 1997. "Fiscal Policy in Latin America," NBER Chapters,in: NBER Macroeconomics Annual 1997, Volume 12, pages 11-72 National Bureau of Economic Research, Inc.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:ays:ispwps:paper0112. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Paul Benson)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.