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Latin American Macroeconomic ReformsThe Second Stage$
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Jose Gonzalez, Vittorio Corbo, Anne O. Krueger, and Aaron Tornell

Print publication date: 2003

Print ISBN-13: 9780226302676

Published to Chicago Scholarship Online: February 2013

DOI: 10.7208/chicago/9780226302683.001.0001

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PRINTED FROM CHICAGO SCHOLARSHIP ONLINE (www.chicago.universitypressscholarship.com). (c) Copyright University of Chicago Press, 2021. All Rights Reserved. An individual user may print out a PDF of a single chapter of a monograph in CHSO for personal use.date: 24 September 2021

Taxing for Equity a Proposal to Reform Mexico's Value-added Tax

Taxing for Equity a Proposal to Reform Mexico's Value-added Tax

(p.357) 10 Taxing for Equity a Proposal to Reform Mexico's Value-added Tax
Latin American Macroeconomic Reforms

Enrique Dávila

Santiago Levy

University of Chicago Press

This chapter analyzes the incidence of value added tax (VAT) in Mexico. It first argues that the current VAT regimes (zero-rates and exemptions for various categories of goods) are ineffective and inefficient tools with which to combat poverty, which is why they must be eliminated. However, it is essential that part of the population be compensated for the impact of adjusting VAT rates. The chapter establishes that some proportion of the country's population (low-income groups) are eligible for compensation and that individuals belonging to such groups each receive either a Slutsky transfer or a uniform compensation for all members of the target population. Next, it analyzes the type of instruments and incentives that can be used to carry out these compensations. The final section summarizes the conclusions of the analysis and makes some brief remarks on the political economy implications of the study's proposal. A commentary is also included at the end of the chapter.

Keywords:   taxation, tax policy, VAT, poverty, Slutsky transfer, compensation

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