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5 Tax Memo 1 (1955)

handle is hein.journals/taxmmo5 and id is 1 raw text is: TAX No. 5 MEMO February, 1955 REPORT ON FEDERAL SALES TAX For some four years the Foundation has been making an intensive study of the Excise Tax Act, with particular emphasis on the sales tax. This report presents the conclusions of our investigation. The study began with a very broad field survey -the first ever to be made-by a competent investi- gator, Dr. John F. Due, of the University of Illinois. The results of this survey, based on months of travel and interviewing, were published in full in 1951 by the Foundation.' Following this general introduction more inten- sive examination has since been made by the Foundation staff. At the last four annual confer- ences the sales tax has been discussed with increas- ing interest by businessmen, lawyers and account- ants.' At five smaller meetings called solely for this purpose the Foundation staff has discussed sales tax problems with representatives of 55 businesses. In addition two surveys have been made by mail through questionnaires. One solicited the views on specific problems of the corporate members of the Foundation and another canvassed the experience of the members of the Canadian Controls of the Controllers Institute of America, who are executives of a broad group of firms. These activities have been supplemented by almost continuous study and consideration of the theoretical and practical aspects of the problems by the Foundation staff. Taken as a whole this programme represents as thorough and conscientious an attempt to ascertain 1 Due, J. F., The General Manufacturers Sales Tax in Canada. Canadian Tax Papers, No. 3, October 15, 1951. S A report of this discussion may be found in the printed Proceedings of the conferences held in 1951 to 1954 inclusive. In addition special studies or cornpilatio'ns relating to the sales tax Were prepared by the staff and printed as Data Papers in connection with the conferences in 1952 to 1954 inclusive. the facts as has ever been made for any important tax measure in Canada. The possible exception is the Income Tax Act, all aspects of which were fully studied by the Foundation and other organizations in the revision of a few years ago. Indeed it was the encouraging results of that experiment which led the Foundation to attempt to subject the Excise Tax Act to the same sort of re-appraisal. This deci- sion was strengthened by the conviction that a broad based commodity tax structure is an essential complement to the income tax in a well balanced tax system; in short that our federal sales tax is here to stay. And, without arguing the merits of alternative forms of tax, it is assumed that it will stay in its present form, i.e., as a manufacturers' tax. From the evidence gathered in these impartial and painstaking researches certain conclusions have emerged which it is now felt to be in the public interest to state. These conclusions, and some recommendations based on them, are presented in brief outline herein. The brevity of their expression is only to facilitate reading. It is not intended to convey the impression by such abbreviated present- ation that the subject matter is simple nor that the solutions are easy. The important findings of the study are that there are two basic weaknesses in the taxing statute and that statutory amendment in respect of these offers hope of substantial improvement in terms of certainty, simplicity, equity and cost of compliance and collection. One of these weaknesses has to do with the determination of the tax base-the taxable sale price-and the other with the exemption of certain building materials and of equipment and apparatus used directly in the process of manufac- ture or production. That these two general and basic weaknesses exist is accepted on all sides. FOUNDATION TA X CANADIAN

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