Canada

The second most important source of revenue for Canadian governments is sales and excise taxes. These revenues include general sales taxes (such as provincial sales taxes, the harmonized sales tax [HST], and the goods and services tax [GST]), as well as various specific duties on fuel, alcohol, cigarettes, carbon emissions, and other products. As a share of the GDP, sales and excise taxes have changed little over the years, generally fluctuating from around 8.5 percent (in 1970) to as low as 7 percent (in 2008) and as high as 9.3 percent (in 1989). Yet, as discussed in more detail later, Canadian governments have extensively reformed their sales tax regimes in the past two decades. The federal government replaced the manufacturers’ sales tax with the GST on January 1, 1991. In the years that followed, a number of the provinces have also adopted a value-added tax coordinated with that of the federal government (the HST) so that over two-thirds of Canada’s economic activity is carried on in provinces with fully integrated and modern value-added sales tax systems. Despite these significant changes, the percentage of sales and excise taxes to GDP has moved slightly downward in recent years, because the federal government reduced its GST rate from 7 percent to 5 percent.