Abstract
Income trust (flow-through entity) as a business structure became increasingly popular in Canada since 2003. It gave trust companies advantage of shifting their tax burden on to the investor. The investor, on the other hand, received steady and higher than the market rate of return on invested capital and also received capital gains in the form of ‘return of capital’. When some important Canadian corporations were in the process of changing their structure from public corporations to income trusts, the government of Canada in a sudden shift of policy announced that it would remove the tax advantage of income trusts and put them on equal footing with Canadian corporations. This policy announcement in October 2006 was to be effective from 2011 and gave four years to trusts to convert into public corporations. The paper shows that the decision of the government led to their loss of value, mergers and acquisitions, foreign takeovers and their conversion into corporations. By the end of 2011 all the specified flow-through entities (SIFTS) i.e., energy trusts, business trusts and limited partnership trusts became nonexistent. The paper shows that the government policy might be based on disputed assumptions about the amount of tax collection from public corporations and income trusts.
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Pyare Arya
Pyare Arya (Ph.D.) Joined Saint Mary's University in 1982 after teaching at the University of Delhi (Delhi, India), Ahmadu Bello University (Zaria, Nigeria), University of Calabar (Calabar, Nigeria) and Niagara University (Niagara Falls, N.Y., U.S.A.). During his teaching career, which started in 1967, Dr. Arya has written seven books and several research papers. He has also been reviewing articles for the Arab Journal of Administrative Sciences.