I have seem many GOP politicians complain about VAT’s world wide so I felt it is time to explain how Canada’s works and the benefits.
I decided after reading Mark Sumner post on the “border adjustment tax”- which is a stupid idea - www.dailykos.com/… .
The biggest complaint is how VAT’s treat America’s made products unfairly in other markets.
First Canada’s tax is called either GST or HST - Goods and Services tax and Harmonized Sales Tax.
The main goal of the GST was to fairly tax all producers — especially services. So your lawyer also got taxed. This replaced an old manufacturer’s tax that was unfair to manufacturers. The GST is a sales tax imposed at the federal level. Nothing more. It is collected by businesses when a product or service is sold to either an individual or a consumer. Low income households get a rebate cheque every quarter. There is no tax on basic food.
The tax is neutral as far are companies are concerned. At the end of a reporting period, a company takes the total of GST paid minus the GST collected. If the company pays more, then they get a rebate from the government. If they collected more, they send the government a cheque.
A retail store will almost always send money. An exporter will almost always get money back.
There is no net cost to the business!
As for exports and imports, there is no tax on goods leaving the country. When an importer receives goods from another country, then they pay the tax on the value.
The HST is simply provinces and the federal government getting together and having one tax in each province and combining the GST and provincial sales taxes. Not all provinces have the HST. There is no local sales tax in any town.
The GST/HST has many benefits and problems, but does work out for the better.
It brings in money needed for government use. It taxes everything — services in addition to goods. Rebates handle most of the local income households. Neutral to businesses and to exports. There are some specific programs such as for new home construction, etc. Land is not taxed.
It is also making for more simply accounting. For example- under the old provincial sales tax, companies did not pay tax on goods used for reselling but did for something used for consumption. So a bakery would pay provincial sales tax on supplies and even bakery pans. So lots of cheating could occur.
But as always there are a few issues. Food is not taxed but most restaurant food is. Bread is not taxed but a chocolate covered loaf is. ( AFAIR )
For GOP politicians to complain about VAT’s is simply wrong. VAT’s are a sales tax. The “border adjustment tax” is not only illegal but also moves the burden completely to the consumer.