To Tax or Not to Tax Income Trusts: The Valuation Effect of a Canadian Dividend Tax Cut

22 Pages Posted: 24 Dec 2007

See all articles by Fayez A. Elayan

Fayez A. Elayan

Brock University-Goodman School of Business

Date Written: December 22, 2007

Abstract

In September of 2005, the Canadian government launched a consultation process with regard to the non-taxable status of income trusts. Less than two weeks later, they announced that the issuance of advance rulings with regard to the creation of new income trusts was being suspended. Although everyone anticipated that the government's next move would be to eliminate the tax-free status of income trusts, instead, on November 23, 2005, they announced a reduction of the tax on dividend income in an effort to eliminate the tax system's bias in favor of income trusts relative to non-income trusts. We examine the economic impact of that announcement of November 23, 2005 on the income trust sector.

Keywords: Income Trusts, Dividend Taxation, Tax Cut

JEL Classification: G35, G38, H25

Suggested Citation

Elayan, Fayez A., To Tax or Not to Tax Income Trusts: The Valuation Effect of a Canadian Dividend Tax Cut (December 22, 2007). (CAAA) 2008 Annual Conference Paper. Available at SSRN: https://ssrn.com/abstract=1078198 or http://dx.doi.org/10.2139/ssrn.1078198

Fayez A. Elayan (Contact Author)

Brock University-Goodman School of Business ( email )

1812 Sir Issac Brock Way
St. Catharines, Ontario L2S 3A1
Canada
905-688-5550 (Phone)
905-688-9779 (Fax)

HOME PAGE: http://www.brocku.ca

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