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The Economic Incidence of Replacing a Retail Sales Tax by a Value-Added Tax: Evidence from Canadian Experience

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Author Info

  • Richard M. Bird

    (University of Toronto)

  • Michael Smart

    (University of Toronto)

Abstract

A decade ago, several Canadian provinces replaced the retail sales taxes by value-added taxes. This paper estimates the effects of this tax substitution on consumer prices in the reforming provinces. Consistent with theory, we find that the resulting effective tax rate changes were shifted forward to consumers in most sectors of the economy. The overall effect on tax-inclusive consumer prices was small, albeit perhaps somewhat regressive.

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File URL: http://www-2.rotman.utoronto.ca/userfiles/iib/File/IIB14(1).pdf
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Bibliographic Info

Paper provided by Rotman Institute for International Business, Joseph L. Rotman School of Management, University of Toronto in its series Working Papers Series with number 14.

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Length: 19 Pages
Date of creation: Jun 2008
Date of revision: Jun 2008
Handle: RePEc:ttp:iibwps:14

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Related research

Keywords: tax incidence; sales tax; value-added tax; Canada;

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Cited by:
  1. Richard M. Bird & Michael Smart, 2012. "Financing Social Expenditures in Developing Countries: Payroll or Value Added Taxes?," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper1206, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.

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