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Global economic integration has changed not only corporate taxation but also other aspects of the tax system, especially sales taxation. As noted later, the federal manufacturers’ sales tax, a single-stage archaic tax supposedly imposed at the wholesale level, was criticized for putting manufacturing companies at a competitive disadvantage since the tax increased the costs of manufactured goods produced in Canada relative to those in other countries. First the federal government and then six provinces adopted a value-added tax that removed these distortions, and greatly aided the competitiveness of Canadian producers. (However, and as noted later, British Columbia has voted in a referendum to revert to its previous provincial sales tax.)
These business and sales tax measures led to a more neutral treatment of industries and goods and services. Overall, corporate taxes on services declined relative to primary and manufacturing industries, because some preferences for the primary and manufacturing industries were reduced (although many tax preferences continue today). Sales taxes on business inputs have been removed or reduced in favour of a higher burden of sales taxes on goods and services sold domestically in Canada.
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