REVENUE ELASTICITY OF THE MAIN FEDERAL TAXES IN MEXICO

an inelastic tax system increases the uncertainty associated with tax revenue collection. this results in continuous short-term adjustments to maintain the stability of tax collection. in this paper, we estimate the revenue elasticity of the principal taxes in mexico, finding a much greater elasticity than that found in previous studies. a cointegration model between the revenue and taxes is used which satisfies strong exogeneity, providing a basis for congruent and reliable projections. using this model, the tax revenue projected for 2011 is much lower than the estimates prepared by mexico's federal government.