Canada - GST not all that bad, say tax pros

Canada's much-maligned GST might not be so reviled after all, at least among the world's financial elite, according to a new study.

On Tuesday, KPMG Canada said senior tax professionals picked Canada's goods and services tax (GST) as a better regime than similar systems in the United States, Germany and Japan.

And that is good news, considering the Canadian executives surveyed said, by a two-to-one margin, that Ottawa will be getting more of its cash from these kind of taxes.

GST results

The report surveyed senior financial officers from more than 500 of the world's biggest corporations and found that Canada's GST, a type of indirect tax, ranked seventh out of 32 tax regimes for ease of use.

"The fact is that our system compares favourably with others as user-friendly," said Deborah Taylor, national leader of KPMG's indirect tax practice.

The United Kingdom has the most efficient indirect tax system, according to the survey. The Netherlands, Luxembourg, Ireland, Singapore and Switzerland also polled better than Canada.

Italy had the worst tax regime, the study concluded.

Interestingly, the United States ranked 11th.

"I'm surprised the U.S. didn't rank worse," Taylor said.

That is because there are more than 7,000 separate indirect taxes levied by all levels of government south of the border, she said.

Canada's regime

Foreign executives might think of Canada as a good place to pay taxes efficiently, Taylor said.

But, some Canadians officials were not as kind to Ottawa, ranking this country as the worst place for tax compliance.

That indicated, in a country in which some provinces have separate retail sales taxes, Canada could make things even better for business, KPMG's Taylor said.

"Based on the survey results, perhaps Canada could be more competitive if we didn't have both retail sales tax and GST systems in these provinces," she said.

Currently, New Brunswick, Nova Scotia and Newfoundland have sales taxes that are harmonized with the GST while Alberta does not levy a provincial sales tax. The other provinces collect sales taxes separately from Ottawa's GST.

Improving a nation's indirect tax system will be even more important as the Canadian chief financial officers and tax directors believe that governments here will start getting a bigger share of their money from these taxes, KPMG said.

Nearly two-thirds of Canadian tax professionals said this country will raise a larger portion of its cash from the GST and retail sales taxes as compared to the corporate income tax.

That finding was despite Ottawa's relatively recent cut in the national GST rate.

Currently, the federal government derives 13 per cent of its money from the GST, while Ontario gets 18 per cent of its cash from provincial sales tax.

Source : CBC.ca - Toronto, Ontario, Canada, dated 18/08/2008