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Do We Care? A Study of Canada's Indirect Tax System

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  • Michael Cragg

Abstract

This paper builds on the optimal taxation literature of Diamond and Mirrlees (1971), Ahmad and Stern (1984), and Christiansen and Jansen (1978). Using ethically defensible measures of social welfare, the effective redistribution due to the Canadian indirect tax system is measured and directions of welfare enhancing tax reform are uncovered. Using micro-data from the Family Expenditure Survey, this study finds that, surprisingly, the existing Canadian indirect tax system is neither progressive nor regressive, rather, the implicit government preferences (as reflected in the indirect tax system) show no aversion to cross-class income inequality.

Suggested Citation

  • Michael Cragg, 1991. "Do We Care? A Study of Canada's Indirect Tax System," Canadian Journal of Economics, Canadian Economics Association, vol. 24(1), pages 124-143, February.
    • Handle: RePEc:cje:issued:v:24:y:1991:i:1:p:124-43
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    Cited by:

    1. Creedy, John & Li, Shuyun May & Moslehi, Solmaz, 2010. "Inequality Aversion And The Optimal Composition Of Government Expenditure," Macroeconomic Dynamics, Cambridge University Press, vol. 14(S2), pages 290-306, November.
    2. Peter Tóth & Andrej Cupák & Marian Rizov, 2021. "Measuring the efficiency of VAT reforms: a demand system simulation approach," Oxford Economic Papers, Oxford University Press, vol. 73(3), pages 1218-1243.
    3. David Madden, 1995. "An analysis of indirect tax reform in Ireland in the 1980s," Fiscal Studies, Institute for Fiscal Studies, vol. 16(1), pages 18-37, May.
    4. Alessandro Santoro, 2007. "Marginal Commodity Tax Reforms: A Survey," Journal of Economic Surveys, Wiley Blackwell, vol. 21(4), pages 827-848, September.
    5. Alemayehu Geda & Abebe Shimeles, 2005. "Taxes and Tax Reform in Ethiopia, 1990-2004," WIDER Working Paper Series RP2005-65, World Institute for Development Economic Research (UNU-WIDER).
    6. Mickaël Beaud & Thierry Blayac & Patrice Bougette & Soufiane Khoudmi & Philippe Mahenc & Stéphane Mussard, 2013. "Estimation du coût d'opportunité des fonds publics pour l'économie française," Working Papers halshs-01077141, HAL.
    7. Urzúa, Carlos M., 2004. "The Ahmad-Stern approach revisited: Variants and an application to Mexico," EGAP Working Papers 2004-05, Tecnológico de Monterrey, Campus Ciudad de México.
    8. Jeni Klugman, 2007. "Ethiopia : Explaining Food Price Inflation," World Bank Publications - Reports 19539, The World Bank Group.
    9. Andrej Cupák & Peter Tóth, 2017. "Measuring the Efficiency of VAT reforms: Evidence from Slovakia," Working and Discussion Papers WP 6/2017, Research Department, National Bank of Slovakia.

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