OECD Taxation Working Papers

ISSN: 
2223-5558 (online)
http://dx.doi.org/10.1787/22235558
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Working papers from the Centre for Tax Policy and Administration of the OECD that cover the full range of the Centre’s work on taxation with the main focus on tax policy related issues.
 

The environmental tax and subsidy reform in Mexico You or your institution have access to this content

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Author(s):
Johanna Arlinghaus1, Kurt van Dender1
Author Affiliations
  • 1: OECD, France

05 July 2017
Bibliographic information
No.:
31
Pages:
28
http://dx.doi.org/10.1787/a9204f40-en

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In a bold policy effort, Mexico recently moved away from subsidies to transport fuels, increased tax rates on these fuels and introduced a carbon tax. This paper analyses these reforms using a broad set of criteria that consider the main practical dimensions of environmental policy design: environmental effectiveness, equity and distributional impacts, broader tax system impacts, macroeconomic effects, compliance and administration, policy process and consistency. The reforms significantly improve the extent to which the external costs of energy use are reflected in prices and increase government revenues, but, as price deregulation progresses further, more attention may need to be devoted to analysing and addressing the policies’ distributive effects. The analysis also highlights that ease of administration and collection are an important and desirable property of carbon taxes, especially in emerging market contexts.
Keywords:
tax reform, fossil-fuel subsidies, energy taxation, carbon pricing, distributional effects
JEL Classification:
  • H23: Public Economics / Taxation, Subsidies, and Revenue / Externalities ; Redistributive Effects ; Environmental Taxes and Subsidies
  • Q48: Agricultural and Natural Resource Economics ; Environmental and Ecological Economics / Energy / Government Policy
  • Q52: Agricultural and Natural Resource Economics ; Environmental and Ecological Economics / Environmental Economics / Pollution Control Adoption and Costs ; Distributional Effects ; Employment Effects
 
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