Report No. 61
11.2. Peculiarities of taxation and commodities.-
We would, in this connection, like to note what has been stated by an American writer1 on the problem of evasion of taxes on transactions relating to commodities.
"Where the payers of a particular tax are few in number, the administration can exercise a careful and detailed supervision, which is impossible where the number of tax-payers is large. A general sales or turnover tax suffers from the circumstance that it must be collected in small amounts from a large number of tax-payers. The tax administration cannot enquire carefully into the accounts of every little country sider mill and every corner candy store. Instead, it must trust to the honesty of the tax-payers and to such devices as the sample check, even though this involves the loss of a substantial proportion of the tax revenue through evasion. The alternative-to allow an exemption which will eliminate the flood of returns from small dealers and small manufacturers-weakens the economic character of the tax."
1. Schultz and Harris American Public Finance, (1949), pp. 533-534.