The Impact of Goods and Services Tax on the Pattern of Canadian Consumer Spending and Saving

This paper examines the effects of the Canadian Goods and Services Tax (GST) on the pattern of Canadian consumption and savings over a period of time. To test the change since the introduction of GST, we apply a version of the almost ideal demand system (AIDS) which allows individual demands to be conditional on shift parameters. The empirical results suggest important changes in the relationships since the introduction of GST in Canada. The appearance of GST in 1991 has significantly increased the share of savings and services, while the share of commodity goods has decreased.