Canada's VAT is Sub-Par Compared to the World

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University of Calgary - School of Public Policy

Feb 24, 2012, 05:40 ET

The School of Public Policy Provides Proposals for Change

CALGARY, Feb. 24, 2012 /PRNewswire/ - A paper released today by The School of Public Policy finds that Canada's GST has become plagued by exemptions, rebates and rate reductions, and the impact is proving very costly.

Inefficiencies are leading to roughly $39 billion annually in lost revenues to federal and provincial governments, argues Professor Michael Smart, the report's author.

Smart's evaluation of value-added taxes among OECD countries places Canada's GST well below average in terms of efficiency. As such, Smart recommends a series of base-broadening reforms such as taxing food and agricultural products and reconsidering exemptions or rebates for housing and several public services.

By limiting exemptions and broadening the tax base in this way governments would begin to recapture revenue. This money could then either be put towards reducing deficits or be passed along to consumers by way of a reduced GST rate.

"It would be possible to reduce the GST rate in a revenue-neutral fashion from the current five percent to approximately three percent," Smart writes.

The study can be found online at www.policyschool.ucalgary.ca/publications.

SOURCE University of Calgary - School of Public Policy

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