PST and GST

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November Questions and Answers

Joel Emes

Q: What proportion of the total tax bill do the provincial sales tax and the goods and services tax represent? How does this proportion compare internationally over time?

A: In 1995, taxes on general consumption (mainly, the provincial sales tax and the federal goods and services tax) comprised 15.2 percent of total tax revenue (5.6% of the Gross Domestic Product (GDP)) in Canada. Between 1965 and 1995 the proportion of general consumption tax to total tax revenue fell by 2.6 percentage points. Over the same time period, general consumption taxes to GDP rose from 4.6 to 5.6 percent and total tax to GDP rose from 25.9 to 37.2 percent of GDP (see this month's graph). Table 1 presents general consumption tax collections for several OECD member countries. Except for France, consumption taxes as a percent of GDP have risen in every country listed in table 1. The average for the OECD increased from 3.3 percent of GDP in 1965 to 6.6 percent in 1995. Only in France and Canada were consumption taxes as a percent of total tax revenue lower in 1995 than in 1965. For Canada this means that although consumption taxes have grown since 1965, other types of taxes have grown at a faster rate. The OECD definition of general consumption tax includes value added taxes, sales taxes, and other general taxes on goods and services.

Q: How much of the price of a litre of gasoline is tax? How do Canadian gas taxes and prices compare internationally?

A: On average, 29 of every 56 cents, or 51 percent of the price paid per litre of gasoline is collected as tax. Table 2 displays the total price of gasoline and the proportion paid in tax in Canada and seven other countries. The lowest proportion of tax and the lowest price are in the United States, and the highest proportion of tax and the highest total price are in Britain.

This month's graph shows taxes as a percent of Gross Domestic Product (GDP)

for Canada and several other OECD countries. This figure implies that Canada's tax burden is comparatively low. However, Canada's population is comparatively young, and the social security (pensions) portion of our tax burden is much smaller

than in most of the countries with which Canada is compared in this figure. Demographic shifts and the recently announced changes to the Canada Pension Plan will increase our overall tax rate unless other taxes are reduced or spending is reduced in other program areas.

November Graph

Joel Emes

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Last Modified: Wednesday, October 20, 1999.