VAT Global Trends: What Are the Lessons To Be Drawn for Mexico?

The VAT is a fairly new tax when compared to other taxes, but it has positioned itself as one of the most important taxes in the world. The Mexican VAT system needs to be reformed to line up with global trends and best practices. Although rate variation is almost inevitable for VAT, the use of reduced rates and exemptions should be limited in order to avoid distortions, economic inefficiencies and unnecessary complications in a VAT system. In this article, the author explains that a VAT reform should be accompanied by simplification of the system in general, a more efficient administration of taxes, more effective audits, promotion of voluntary compliance and if possible, less administrative and compliance burdens for businesses.