Income Trusts in Canada- Value Loss from the Change in SIFT Taxation
- Ian A. Glew
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Title:
Income Trusts in Canada- Value Loss from the Change in SIFT Taxation
Author(s):
Ian A. Glew
Publication Date:
2013
Journal Title:
The Journal of Finance Issues
Volume Number:
11
Issue Number:
1
Abstract:
This study investigates the market impact when Specified Investment Flow-Through (SIFT) trusts became liable to an entity tax, announced on October 31, 2006. After-tax valuation ratios indicate an initial after-tax loss of roughly 5% for Ontario taxpayers, which dropped to 3.5% when the legislation took effect in 2011. Tax integration is incomplete, as a 6.3% loss was moderated through beneficial treatment of the return of capital. Lastly, this study finds the after-tax loss for tax-exempt and foreign investors averages 25%, rather than the pre-tax charge of 31.5%. All investors were affected when income trusts were driven from the Canadian market.