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A Better Local Business Tax: The BVT

Author

Listed:
  • Richard M. Bird

    (University of Toronto)

Abstract

This paper makes the case for a new tax for local government: the Business Value Tax (BVT). The BVT is a value added tax (VAT) like the Canadian federal Goods and Services Tax (GST) and the Harmonized Sales Tax (HST) used in some provinces, but it taxes business income rather than sales. The author concludes that a local BVT is economically preferable to other forms of local business tax, administratively manageable, and could be politically desirable – especially for large cities and metropolitan regions with urban infrastructure investment needs. It outlines how the tax works, shows how it differs from the GST/ HST, and discusses the experience with BVT-like taxes in several countries.

Suggested Citation

  • Richard M. Bird, 2014. "A Better Local Business Tax: The BVT," IMFG Papers 18, University of Toronto, Institute on Municipal Finance and Governance.
    • Handle: RePEc:mfg:wpaper:18
    as

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    File URL: https://tspace.library.utoronto.ca/bitstream/1807/81249/1/imfg_paper_18_bird_may%2030_2014.pdf
    File Function: First version, 2014
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    References listed on IDEAS

    as
    1. Richard M. Bird & Enid Slack, 2013. "Local Taxes and Local Expenditures: Strengthening the Wicksellian Connection," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper1323, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
    2. Chun-Yan Kuo & Thomas Mcgirr & Satya Poddar, 1988. "Measuring the Non-Neutralities of Sales and Excise Taxes in Canada," Development Discussion Papers 1988-08, JDI Executive Programs.
    3. William H. Oakland & William A. Testa, 2000. "The Benefit Principle as a Preferred Approach to Taxing Business in the Midwest," Economic Development Quarterly, , vol. 14(2), pages 154-164, May.
    4. Kenyon, Daphne A., 1996. "A New State VAT? Lessons From New Hampshire," National Tax Journal, National Tax Association, vol. 49(3), pages 381-99, September.
    5. Ernesto Longobardi, 2011. "From transfers to tax "co-occupation": the Italian reform of intergovernmental finance," SERIES 0038, Dipartimento di Economia e Finanza - Università degli Studi di Bari "Aldo Moro", revised Dec 2011.
    6. Manzo, Marco & Monteduro, Maria Teresa, 2010. "From IRAP to CBIT: tax distortions and redistributive effects," MPRA Paper 28070, University Library of Munich, Germany.
    7. Massimo Bordignon & Silvia Giannini & Paolo Panteghini, 2001. "Reforming Business Taxation: Lessons from Italy?," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 8(2), pages 191-210, March.
    8. Benjaming Dachis & Adam Found & Peter Tomlinson, 2013. "What Gets Measured Gets Managed: The Economic Burden of Business Property Taxes," e-briefs 166, C.D. Howe Institute.
    9. Bev Dahlby, 2012. "Reforming the Tax Mix in Canada," SPP Research Papers, The School of Public Policy, University of Calgary, vol. 5(14), April.
    10. Smart, Michael & Bird, Richard M., 2009. "The Impact on Investment of Replacing a Retail Sales Tax With a Value-Added Tax: Evidence From Canadian Experience," National Tax Journal, National Tax Association;National Tax Journal, vol. 62(4), pages 591-609, December.
    11. Eva ERDOS, 2009. "The Local Taxation In The European Union – The Hungarian Local Business Tax (Hipa) Case," Curentul Juridic, The Juridical Current, Le Courant Juridique, Petru Maior University, Faculty of Economics Law and Administrative Sciences and Pro Iure Foundation, vol. 2, pages 47-60, June.
    12. James Feehan, 1998. "Optimal Provision of Hicksian Public Inputs," Canadian Journal of Economics, Canadian Economics Association, vol. 31(3), pages 693-707, August.
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    Citations

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    Cited by:

    1. Almos T. Tassonyi, 2017. "The Context and Challenges for Canada's Mid-Sized Cities," SPP Briefing Papers, The School of Public Policy, University of Calgary, vol. 10(9), May.
    2. Daniel Henstra & Jason Thistlethwaite, 2017. "Climate Change, Floods, and Municipal Risk Sharing in Canada," IMFG Papers 30, University of Toronto, Institute on Municipal Finance and Governance.
    3. Bob Baldwin, 2015. "Municipal Employee Pension Plans in Canada: An Overview," IMFG Papers 23, University of Toronto, Institute on Municipal Finance and Governance.
    4. Zack Taylor & Alec Dobson, 2020. "Power and Purpose:Canadian Municipal Law in Transition," IMFG Papers 47, University of Toronto, Institute on Municipal Finance and Governance.
    5. Alberto Porto, 2017. "Impuestos Subnacionales sobre la Producción. Aportes para la Discusión de la Reforma Tributaria," Department of Economics, Working Papers 113, Departamento de Economía, Facultad de Ciencias Económicas, Universidad Nacional de La Plata.
    6. Alberto Porto & Marcelo Garriga & Walter Rosales, 2017. "El Impuesto a los Ingresos Brutos y Alternativas de Reforma," IIE, Working Papers 112, IIE, Universidad Nacional de La Plata.
    7. Alberto Porto, 2017. "Impuestos Subnacionales sobre la Producción. Aportes para la Discusión de la Reforma Tributaria," IIE, Working Papers 113, IIE, Universidad Nacional de La Plata.

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    More about this item

    Keywords

    tax; business value tax; large cities;
    All these keywords.

    JEL classification:

    • H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government
    • H72 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Budget and Expenditures

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