2001
DOI: 10.1093/cep/19.4.424
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The Evolution of Vat Rates and Government Tax Revenue in Mexico

Abstract: As a response to the 1994 Mexican peso crisis, in April 1995 the Mexican government increased the Value Added Tax (VAT) rate from 10 to 15%. More recently, policy makers have debated the potential economic impact of a reduction in the VAT rate on VAT revenue. Using a vector autoregression (VAR) model, this article analyzes the dynamics between government spending, inflation, the VAT rate, and VAT revenue in Mexico. The results from the estimated impulse response functions and variance decompositions indicate t… Show more

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Cited by 9 publications
(3 citation statements)
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“…Strong opposition to a reduction in the VAT has mainly come from government officials, who have pointed out the potentially negative effects of reducing the tax rate (Pagán, Soydemir, and Tijerina-Guajardo 1998). Some researchers have argued that over the past two decades, the government's VAT collection effectiveness has been substantially low due to erosion of the tax base.…”
Section: Introductionmentioning
confidence: 99%
“…Strong opposition to a reduction in the VAT has mainly come from government officials, who have pointed out the potentially negative effects of reducing the tax rate (Pagán, Soydemir, and Tijerina-Guajardo 1998). Some researchers have argued that over the past two decades, the government's VAT collection effectiveness has been substantially low due to erosion of the tax base.…”
Section: Introductionmentioning
confidence: 99%
“…As such, it is imperative to formulate optimal tax reduction strategies from a policy perspective. This entails taking a macroeconomic view to assess the impact of tax reductions on government fiscal revenues [ 26 , 27 ], local debt risks [ 28 ], and the sustainability of tax and fee reductions [ 29 , 30 ]. Liu Q, Zhang X [ 31 ] analyzed the impact of tax reduction policies on fiscal sustainability by collecting panel data from different provinces in China through the FGLS empirical method.…”
Section: Literature Review and Research Hypothesesmentioning
confidence: 99%
“…To compensate the Zedillo government increased the VAT (previously reduced) again in 1995 from 10 to 15 percent (cf. Pagán et al 2001). Zedillo's VAT increase directly pushed a portion of the socialization costs onto Mexico's majority working poor.…”
Section: The 1994-95 Financial Crisis and Bank Recapitalizationmentioning
confidence: 99%