|
|
|
Map of North America |
Email this citationCIAO DATE: 02/05
Tax Effort and Tax Potential of State Governments in Mexico: A Representative Tax System
Horacio Sobarzo
October 2004
Abstract
Over the last two decades, Mexico has modified its intergovernmental fiscal structure from a very centralized system to a distorted scenario where state governments have gained substantial expenditure functions and most of the taxation responsibilities have remained in the federal government. It is argued that to move towards a more fiscally responsible scenario, some decentralization on the taxation side is needed. In this context, by constructing a representative tax system (RTS), this paper evaluates tax effort and tax potential in Mexico. The results are a useful input for policy decision making, not only in the event of future tax decentralization attempts but also in designing a new transfer scheme. The results are also the first RTS constructed for the Mexican case, and show that regional data in Mexico is gradually improving. Also, while the results shed some light as to which taxes could potentially be decentralized, the article warns about the fact that regional disparities in the country may well be a limitation on the extent to which taxes can be decentralized.
