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VAT in a Federal System: Lessons from Canada
Author(s) -
Bird Richard M.,
Smart Michael
Publication year - 2014
Publication title -
public budgeting and finance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.694
H-Index - 30
eISSN - 1540-5850
pISSN - 0275-1100
DOI - 10.1111/pbaf.12052
Subject(s) - obstacle , business , state (computer science) , work (physics) , value added tax , sales tax , value (mathematics) , federal budget , federalism , economics , tax reform , public economics , ad valorem tax , finance , political science , law , engineering , computer science , fiscal year , mechanical engineering , algorithm , machine learning , politics
For many years it has been argued that the value‐added tax (VAT) is neither desirable nor feasible as a subnational tax. At the same time, the existence of state retail sales taxes (RSTs) has been seen by some to be a major obstacle to introducing a federal VAT in the United States. Canada has demonstrated that both these barriers can be overcome. A federal VAT can work well regardless how (or if) states tax sales. In addition, a federal VAT may make it more feasible for states, if they wish, to introduce their own VATs.