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The Impact of NAFTA and Options for Tax Reform in Mexico Jorge Martinez-Vazquez and Duanjie Chen
BibTeX
@MISC{Has_theimpact,
author = {September Nafta Has and Jorge Martinez-vazquez and Duanjie Chen},
title = {The Impact of NAFTA and Options for Tax Reform in Mexico Jorge Martinez-Vazquez and Duanjie Chen},
year = {}
}
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Abstract
This paper provides a review of the evidence on the economic impact of NAFTA, focusing on the evolution of foreign trade and foreign direct investment (FDI) flows in Mexico, and how these changes have affected Mexico's tax structure in terms of its tax bases and the ability to raise tax revenues. Using the marginal effective tax rate analysis, it also compares Mexico's tax system with those of Canada and the U.S. in terms of the tax impact on FDI across the three countries. Two main findings can be drawn from this study. First, by fueling Mexico's export and FDI inflow, NAFTA has a profound impact on Mexico's economic structure and hence the industrial distribution of tax bases. This transformation, in turn, calls for the adaptatio n of the tax structure to a service and manufacturing-export oriented economy. And, second, there are no weighty reasons from a NAFTA perspective for Mexico to undertake fundamental changes in its tax structure. The new wave of tax reform should concentrate on the objectives of raising revenues, simplifying the tax structure, and increasing the efficiency and overall equity of the tax system.
Keyphrases
tax reform tax structure duanjie chen mexico jorge martinez-vazquez tax base tax system profound impact economic impact new wave foreign direct investment industrial distribution foreign trade tax impact main finding manufacturing-export oriented economy economic structure marginal effective tax rate analysis fundamental change overall equity weighty reason tax revenue nafta perspective fdi inflow
