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The GST/HST: Creating an Integrated Sales Tax in a Federal Country

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  • Richard M. Bird

    () (University of Toronto)

Abstract

Canada is not a country with a reputation for bold experimentation. However, Canadian experience demonstrates conclusively that an invoice-credit, destination-based value-added tax (VAT) is workable at the subnational level, with both federal and provincial governments retaining full control over the rates of their sales taxes as well as retaining a surprising degree of policy freedom with respect to the base of the tax. As this paper shows against the background of a concise history of sales taxation in Canada, it has taken decades of federal-provincial negotiations to produce the present substantially integrated national and provincial sales tax system. Moreover, the process not yet complete and the results are far from perfect. Nonetheless, Canada has shown that not only can VATs be introduced at the subnational level but that they can work surprisingly well – at least in a country with an over-riding national VAT.

Suggested Citation

  • Richard M. Bird, 2012. "The GST/HST: Creating an Integrated Sales Tax in a Federal Country," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper1221, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
    • Handle: RePEc:ays:ispwps:paper1221
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    File URL: http://icepp.gsu.edu/files/2015/03/ispwp1221.pdf
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    References listed on IDEAS

    as
    1. Bird,Richard & Gendron,Pierre-Pascal, 2011. "The VAT in Developing and Transitional Countries," Cambridge Books, Cambridge University Press, number 9781107401440, October.
    2. Peter Dungan & Jack Mintz & Finn Poschmann & Thomas Wilson, 2008. "Growth Oriented Sales Tax Reform for Ontario: Replacing the Retail Sales Tax with a 7.5 Percent Value-Added Tax," C.D. Howe Institute Commentary, C.D. Howe Institute, issue 273, September.
    3. Stanley L. Winer, 2011. "Reflections on the Role of Optimal Design in the Tax Policy Process," New Directions for Intelligent Government in Canada: Papers in Honour of Ian Stewart,in: Fred Gorbet & Andrew Sharpe (ed.), New Directions for Intelligent Government in Canada: Papers in Honour of Ian Stewart, pages 205-210 Centre for the Study of Living Standards.
    4. Raj Chetty & Adam Looney & Kory Kroft, 2009. "Salience and Taxation: Theory and Evidence," American Economic Review, American Economic Association, vol. 99(4), pages 1145-1177, September.
    5. Chun-Yan Kuo & Thomas Mcgirr & Satya Poddar, 1988. "Measuring the Non-Neutralities of Sales and Excise Taxes in Canada," Development Discussion Papers 1988-08, JDI Executive Programs.
    6. Raj Chetty, 2009. "The Simple Economics of Salience and Taxation," NBER Working Papers 15246, National Bureau of Economic Research, Inc.
    7. Grady, Patrick, 1990. "An Analysis of the Distributional Impact of the Goods and Services Tax," MPRA Paper 13144, University Library of Munich, Germany.
    8. Bird, Richard M. & Mintz, Jack M. & Wilson, Thomas A., 2006. "Coordinating Federal and Provincial Sales Taxes: Lessons From the Canadian Experience," National Tax Journal, National Tax Association;National Tax Journal, vol. 59(4), pages 889-903, December.
    9. David Murrell & Weiqiu Yu, 2000. "The Effect of the Harmonized Sales Tax on Consumer Prices in Atlantic Canada," Canadian Public Policy, University of Toronto Press, vol. 26(4), pages 451-460, December.
    10. Richard Bird & Pierre Gendron, 1998. "Dual VATs and Cross-Border Trade: Two Problems, One Solution?," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 5(3), pages 429-442, July.
    11. Michael Smart, 2007. "Lessons in Harmony: What Experience in the Atlantic Provinces Shows About the Benefits of a Harmonized Sales Tax," C.D. Howe Institute Commentary, C.D. Howe Institute, issue 253, July.
    12. repec:clh:resear:v:5:y:2012:i:29 is not listed on IDEAS
    13. Keen, Michael & Lockwood, Ben, 2006. "Is the VAT a Money Machine?," National Tax Journal, National Tax Association;National Tax Journal, vol. 59(4), pages 905-928, December.
    14. Bird, Richard M. & Martinez-Vazquez, Jorge & Torgler, Benno, 2008. "Tax Effort in Developing Countries and High Income Countries: The Impact of Corruption, Voice and Accountability," Economic Analysis and Policy, Elsevier, vol. 38(1), pages 55-71, March.
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    Keywords

    Canada; VAT; subnational taxes; intergovernmental fiscal relations;

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