Taxing Consumption in Canada: Rates, Revenues, and Redistribution

Richard Bird and Michael Smart, Canadian Tax Journal (2016; 64(2))
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Paper Citation

Bird, Richard and Michael Smart (2016), “Taxing Consumption in Canada: Rates, Revenues, and Redistribution”, Canadian Tax Journal Vol. 64(2), 417-42.

Paper Abstract

This article examines the role of sales and excise taxes in government revenues and in the Canadian economy. In particular, it explores the distributional effects of consumption taxes among Canadian households, to determine whether and to what extent the tax burden is borne disproportionately by low-income households rather than high-income households. The authors present data on statutory sales tax rates and track the share of sales and excise taxes in Canada’s gross domestic product and government revenues over the past 34 years (1981-2014). They then analyze cross-sectional data on consumption patterns and tax payments of Canadian households, and conclude that the presumed regressivity of sales taxes—particularly general sales taxes like the goods and services tax—is far from clear.