VAT in a Federal System: Lessons from Canada

29 Pages Posted: 24 Jul 2012

See all articles by Richard M. Bird

Richard M. Bird

affiliation not provided to SSRN

Michael Smart

University of Toronto - Department of Economics

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)

affiliation not provided to SSRN

No Address Available

Michael Smart

University of Toronto - Department of Economics ( email )

150 St. George Street
Institute for Policy Analysis
Toronto, Ontario M5S 3G7
Canada
416-978-5119 (Phone)
416-978-6713 (Fax)

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