Una ruta de reforma con bienestar social a los impuestos indirectos en México

This paper discusses the feasibility of a value-added tax (VAT) reform in Mexico, as a path to increase revenues progressively with social welfare. It proposes a novel method of decomposition of the Kakwani index, as it allows the detection of the categories of expenditure that contribute the most to progressivity or regressivity. It obtains indirect taxes using Mexmod—the tax-benefit microsimulation model for Mexico—to analyze the effect of two hypothetical reform scenarios. Results show that luxury goods can improve progressivity if vat is raised, while food, public transportation, medical services, payment of household services, and maintenance are more likely to be regressive. Therefore, the tax burden from the vat reforms would fall more heavily on high incomes as the low-income households are compensated with a progressive transfer and would potentially increase revenues from the current 4.1 to 5.2 and 6.2 gross domestic product (GDP) points on each scenario, being able to eradicate extreme poverty. Based on this evidence, fiscal policymakers can make the best decisions while prioritizing social welfare and equity of tax payments.