VAT in a Federal System: Lessons from Canada

29 Pages Posted: 24 Jul 2012

See all articles by Richard M. Bird

Richard M. Bird

University of Toronto - Joseph L. Rotman School of Management; Georgia State University - Andrew Young School of Public Policy

Michael Smart

University of Toronto - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute)

Multiple version iconThere are 2 versions of this paper

Date Written: July 23, 2012

Abstract

Canadians developed and implemented a sales tax system that no one in their right mind would have designed from scratch. Nonetheless, more by accident than design, Canada ended up being a bold innovator in sales tax policy and administration in several important respects. For decades, academics had argued almost unanimously that one could not impose a standard invoice-credit destination-based value added tax (VAT) at the subnational level of government. Canada's almost two decades of experience demonstrates conclusively that this view is incorrect: not only can it be done, but it has been done, and done well. Moreover, Canadian experience also demonstrates that a federal VAT can work perfectly well in a country in which some subnational units have their own VATs, some have their own retail sales taxes (RSTs), and some have no sales tax at all.

Keywords: VAT, GST, Canada, dual VAT

JEL Classification: H25, H71

Suggested Citation

Bird, Richard Miller and Smart, Michael, VAT in a Federal System: Lessons from Canada (July 23, 2012). Rotman School of Management Working Paper No. 2115622, Available at SSRN: https://ssrn.com/abstract=2115622 or http://dx.doi.org/10.2139/ssrn.2115622

Richard Miller Bird (Contact Author)

University of Toronto - Joseph L. Rotman School of Management ( email )

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Georgia State University - Andrew Young School of Public Policy

International Studies Program
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United States

HOME PAGE: http://www.aysps.gsu.edu

Michael Smart

University of Toronto - Department of Economics ( email )

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CESifo (Center for Economic Studies and Ifo Institute)

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Munich, DE-81679
Germany

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