World Notes

Why do salted peanuts cost more than unsalted ones? Because the former is deemed a taxable snack, while the latter is a grocery -- and thus exempt from Canada's new 7% goods-and-services tax. A six-pack of yogurt and a dozen oranges are tax-free at the corner grocery, but one of each gets hit when bought in a cafeteria line. Self-employed workers earning less than $30,000 a year don't have to collect and pay the tax at all, so a wash-and-set at the hairdresser could cost $10.70 in one chair and only $10 in the next.

This tide of confusion confirms some of the deeply held fears Canadians expressed during the lengthy legislative battle to enact the value-added tax that went into effect Jan. 1. Now that it is being levied, though, one major anxiety -- a burst of inflation -- seems to have been misplaced. The Department of Finance once expected the levy to increase the price index 1.25% this year, but now, in the midst of a recession, its inflationary impact appears muted.

With a value-added tax now the rule in most industrialized countries, the U.S. is the last major holdout against adopting it to replace diverse and competing sales taxes. So let the debate begin: Is a pizza with extra pepperoni a snack or a staple?