An Input-Output Analysis of the Commodity Structure of Indirect Taxes in Canada

Abstract

This paper uses the Canadian input-output modell to obtain a breakdown of a dollar's worth of final demand expenditure on each consumption commodity category into its value-added, import, and tax components. The methodology and the computed breakdown are described in the second section of the paper, which is supplemented by an appendix giving a fuller description of the analysis. The consumption expenditure breakdown is used to calculate 'nominal' and 'effective' indirect tax rates for each consumption commodity: the difference between a nominal and an effective tax rate consists of indirect taxes levied on interindustry transactions occurring in the course of supplying the commodity. The nominal and effective commodity tax structures are reported and compared in the third section of the paper. The final section discusses other applications of the analysis.