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27 Tax Memo 1 (1961)

handle is hein.journals/taxmmo27 and id is 1 raw text is: TAX No. 27 MEMO April, 1961 THE ONTARIO SALES TAX 1. STRUCTURE John F. Due, Professor of Economics, University of Illinois Since last summer, when Premier Frost announced that the province would be likely to resort to a sales tax if it did not receive the requested division of income taxes from the Dominion, there has been strong expec- tation that 1961 would see the introduction of the tax. The announcement was made in the Budget Statement on March 9, the tax to become effective September 1, 1961. Later in the day Bill 107, providing for the tax, was introduced, and after several amend- ments, was enacted. Thus it is possible at this time to review the structure of the tax, although various aspects of its operation are not as yet known.' The provincial government obviously made a careful study of the other sales taxes before developing the structure of the levy, and has very clearly, for the most part, adopted the good features and avoided those which have been most troublesome. There has been a great tendency for other 1 A later Tax Memo, dealing with the operation of the tax, will be published after the government has issued its regulations. 2 The other provinces tax various specified utility services. 5 An Interesting by-product of the sales tax is Provincial provinces and the states to copy the taxes of their next door neighbours regardless of the merits or disadvantages. The Basic Nature The tax is, of course, strictly a retail sales tax, applying to the final sale to the consumer and not to any sales for resale. Commendably the province labelled the tax a retail sales tax, instead of using a smoke- screen term based on the use of the revenue. As in the other provincial levies all services, including utilities,2 are excluded, except local telephone charges. The tax takes the so-called direct form, levied technically on the consumer, the vendor being designated as the agent of the province for the purpose of collection. This approach is necessary in the absence of a constitutional amendment authorizing the indirect form.3 One conse- quence is the liability on the part of the customer for the tax if the vendor does not collect it. Treasurer Allan's statement that the province had no intention of having the tax hidden if the constitutional amendment were adopted. It was this fear which led to strong opposition to the amendment. Additional copies of this Memo may be obtained at a price of 15¢. CANADIAN TAX FOUNDATION

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