In praise of VAT

Stephen Gordon tries to reconcile progressives with sales taxes.

Outside Canada, it is generally accepted that high VAT rates are an essential component of social policy: see the accompanying graph. Of the 21 OECD countries that spend more on social programs than does Canada, 19 have higher VAT rates. There are no rich countries that have pulled off the trick of sustaining high levels of social spending with low VAT rates … One of the more convenient features of the GST/HST is that it has already set up the infrastructure for transferring income to low-income households. The GST/HST tax credit can be used as a basis for an even more ambitious system of transfers at almost no additional administrative cost. All that is required is the political will to use it.

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