Effects of Value Added Tax on Mexican Economy. A Multisectorial Analysis by Developing an UApplied General Equilibrium ModelV (MEGA)

For this work, we developed a General Equilibrium Model for the Mexican economy where the role of the indirect tax rate on value added is important. The model is used to analyze the effect of the tax reform proposed by the President in 2001. Without any doubts, the results obtained are important for discussion of actual themes in economic politics in Mexico. Particularly, evidence suggests that applying a tax rate of 15% on food, medicines, educational services and press and editorial products will represent 93,000 million pesos of additional resources for the government, of which 11,079 million pesos could be used to compensate the first three deciles of the population in order to maintain their original consumption level.