Department/School

Accounting

Date of this version

2014

Document Type

Article

Keywords

Value Added Tax, Inflation, Consumer Price Index, Consumption Tax, United Kingdom, Canada, United States

Abstract

The US has been considering introducing a National Consumption Tax federally. This would be in addition to the states’ sales taxes. Since a consumption tax would be an added cost to the consumer, it would be expected that inflation would be increased. This paper uses graphs and statistical methods to ascertain whether inflation in the UK and Canada was affected by the introduction or change in rate of the Value Added Tax (or Goods and Services Tax). It was found that the introduction of a VAT in the UK showed no significant effect on the rate of change of CPI, whereas the introduction of GST in Canada did have a significant increase in the rate of CPI. It was also found that when the tax rates were changed substantially, inflation was affected; however, modest changes in the tax rate did not affect inflation.

Published in

Asian Journal of Finance and Accounting

Citation/Other Information

6(1), 138-158. dx.doi.org/10.5296/ajfa.v6i1.5065

Included in

Accounting Commons

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