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8 Tax Memo 1 (1955)

handle is hein.journals/taxmmo8 and id is 1 raw text is: TAX No.8 MEMO September, 1955 SALES TAX REVENUE ANALYSED Although it is fairly common knowledge that the federal manufacturers' sales tax of 10 per cent yields a total amount of $700 to $800 million a year, the origin of this large revenue in terms of individual industries and individual products is almost a com- plete mystery. No official analysis has ever been published and as far as is known the information is not even compiled, nor is there much information on the sales tax on individual articles. In this present study the Foundation attempts to fill in the gap with estimates based on various forms of indirect evidence. These estimates are only rough approxi- mations and cannot be treated as accurate calcula- tions. However, despite these limitations the results are extremely interesting. The study analyses the total revenue of $734 million in the fiscal year ended March 31, 1954, the latest year for which supporting data are available. Of this total it has been possible to account for some $668 million, or about 90 per cent of the total. This 90 per cent is divided among three broad groups of purchases as follows: (1) consumer purchases-$428 million, or 58 per cent of the total; (2) industry purchases-$174 million, or 24 per cent of the total; and (3) defence purchases-$66 million, or 9 per cent of the total. Within the consumer group the largest items, and the percentage of the total revenue for which they accounted, were as follows: clothing and per- sonal effects, 15 per cent; household appliances, furniture and furnishings, 10 per cent; passenger automobiles, parts and accessories, 10 per cent; alcoholic beverages, 6 per cent; confectionery, soft drinks and taxable foods, 4 per cent; and tobacco products, 4 per cent. The balance for which an accounting could be made included soaps, toilet articles, medicines, gasoline, lubricants and miscel- laneous products, and represented 9 per cent of the total. The largest identifiable item of taxable industrial purchases was machinery and apparatus purchased by utilities. (Utilities in this sense includes rail- ways, airlines, power, gas and water companies, telephone and broadcasting companies, etc., prac- tically all of whose machinery and apparatus is taxable. This group accounted for 8 per cent of the total. Trucks, tractors, buses (and parts and acces- sories), 4 per cent; and gasoline and lubricants con- sumed by trucks, buses, etc., 4 per cent, were the next largest items. The other two identifiable items were building equipment and materials and taxable machinery, store and office appliances. Defence equipment purchased by the Department of National Defence accounted for $66 million or 9 per cent of the total. All goods that are generally taxable under the sales tax are taxable when sold to the federal government, but only defence equipment can be isolated without risk of duplicating revenues allocated to other general purchases. Military air- craft, ordnance, tanks, ships, electronic equipment, etc., would be the items producing most of the tax. Where taxes on individual commodities are con- cerned much depends on the quality and price of the particular article considered. The sales tax content' of items of a given price ranging from a tube of toothpaste to a passenger automobile have been estimated in this study. Details are set forth in Table II herein. It must be emphasized again that the information on which this study is based, while the best that could be obtained, was not primarily designed for sales tax estimation purposes, and the results should therefore be accepted with reservations. The statisti- cal weaknesses are fully explained in the text. It should also be emphasized that the study relates only to the 10 per cent federal sales tax. Special excise taxes and excise duties are also levied on many of the articles subject to sales tax. It is hoped that the estimates will shed some light on an area of almost total darkness and at least partially answer the question, Whence does the sales tax revenue come ? Additional copies of this Memo may be obtained on request FOUNDATION T AX CANADIAN

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