Value added tax in Canada is known as Goods and Services Tax. The goods and services tax was introduced in Canada on the 1st of January 1991. It was introduced by Brian Mulroney, who was the Prime Minister at that time and Michael Wilson, who was the finance minister. The goods and services tax in Canada replaced the manufacturers' sales taxes. The main purpose behind introducing the goods and services tax was that the manufacturers' sales tax was having a negative impact on the export prospects of the manufacturing sector in Canada. The manufacturers' sales tax was hidden and the rate of taxation was 13%. The goods and services tax could be called a multi-level tax.
The introductory rate of the value added taxes in Canada was 7%. At present the rate is 5%. In Canada the value added taxes are taken along with the sales taxes that are applicable for the particular provinces.
The only exception to this is the province of Alberta. There are no sales taxes at the provincial level in Alberta. In provinces like New Brunswick, Nova Scotia and Newfoundland a Harmonized Sales Tax is charged.
The Harmonized Sales Tax is a combination of goods and services tax and the provincial sales tax. The rate of the goods and services tax is 5% and the provincial sales tax rate is 8%. This means that the total harmonized sales tax collected in the three above mentioned provinces is 13%.
There are certain items that are regarded as being zero rated under the value added taxation system in Canada. The items are basic groceries, outbound transportation, prescription drugs, medical devices and inward transportation. The export of certain goods and services are also regarded as being zero rated. The value added taxes of Canada have helped in the increase of the efficiency of the Canadian economy.
In Nigeria, as well as around the world, a majority of taxpayers view tax not as a contractual contribution to government expense, but as an involuntary tribute to be paid to avoid prosecution and penalty. Merely transcribing taxes from economic textbooks into local law will not work; tax regimes have to be developed from within the society, and targeted at the peculiar needs of the government. Tax policies have to be written by the people – and for the people. Only then would a sense of participation and expectation be truly generated, and the tax system manifestly effective.
Professor of Economics & Director of the Earth Institute at Columbia University. Special Adviser to the UN Secretary-General on the Millennium Development Goals. Founder & co-President of the Millennium Promise Alliance.
QFINANCE is a unique collaboration of more than 300 of the world’s leading practitioners and visionaries in finance and financial management, covering key aspects of finance including risk and cash-flow management, operations, macro issues, regulation, auditing, and raising capital.
Vice President and Director of the Global Economy and Development Program at the Brookings Institution. Former Turkish Minister of State for Economic Affairs. Head of the United Nations Development Program (UNDP) from 2005-2009.