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go to municipal governments and are their major source of revenue, have fallen from 3.9 percent of the GDP in 1970 to 3.3 percent in 2008.
While all industrialized economies rely on taxes similar to those in Canada, there is significant variation in the combination of taxes in different jurisdictions, as shown in table 1.4. Compared with the United States, for example, Canada relies much less heavily on payroll taxes but much more heavily on sales taxes. European countries rely much more heavily on payroll and sales taxes than Canada. They rely on personal income taxes to varying degrees; in Denmark, for example, personal income taxes are 25 percent of the GDP, a higher ratio than in any other OECD country. Australia, Canada, the United Kingdom, and the United States tend to levy higher property taxes as a share of the GDP than many (but not all) European countries.
There are many economic, historical, cultural, and political factors that explain the variation in the relative importance of different types of taxes across countries. This topic is too extensive to discuss in our book on Canadian tax policy. As a brief generalization, however, raising revenues from a number of tax sources at relatively modest rates may prove less difficult than relying on only a very few taxes with higher rates. Further, developing countries that have only basic administrative systems find it easier to rely on simpler taxes, and may have difficulties collecting revenues from complex income or wealth taxes.
The World Economy and the Changing Canadian Tax System
The Canadian tax system has changed remarkably in the almost 150 years since Confederation, and even in the last 20 years, but so too has the Canadian economy, especially as a result of economic integration at the international level.
In the 19th and early 20th centuries, Canada was primarily a producer of basic commodities, including lumber, metals, and foodstuffs. But gradually Canadian manufacturing.