The Forbidden Fruit Juice : Adding GST on Groceries to the Tax Base in Canada

GST/VAT should apply to groceries in Canada. Misconceptions have led many Canadians to oppose taxing groceries or special interest groups to complain about the inequities inherent in taxing some food products but excluding others. With a broader GST base, for example by including groceries, the rate can be kept lower for a given amount of revenue. A lower rate is important, as the distortionary cost imposed by the VAT increases with the rate. Moreover, high income groups enjoy more tax relief from the concessionary treatment of groceries than low income groups. Concerns about regressivity can be addressed through refundable credits. Canada should have included many necessities when it enacted the GST, and Canadians should have recognized that the GST was fundamentally superior to the MST it replaced in many ways. This did not happen. Canada is left with complex GST rules that increase administrative costs for government, compliance costs for businesses, and create inscrutable consumer-facing tax rules. Groceries are an exemplar, and by including them in the tax base, it would be harder for special interest groups to lobby for exclusions from the base that are not in the public interest