Compton, Ryan and Sandler, Daniel and Tedds, Lindsay M. (2010): Backdating, tax evasion, and the unintended consequences of Canadian tax reform. Published in: Tax Notes International , Vol. 59, No. 9 (2010): p. 671.
Download (157Kb) | Preview
In 1984 and 2000, significant changes were made to the tax treatment of employee stock options in Canada. Although designed to increase the use of stock options as a compensation vehicle (1984) and decease the loss of knowledge workers (2000), we argue that these tax changes were largely ineffective and perhaps unneeded. Further we demonstrate the negative unintended consequences of these actions, specifically that they reward the backdating of employee stock options and promote tax evasion, and discuss the policy implications of these unintended consequences.
|Item Type:||MPRA Paper|
|Original Title:||Backdating, tax evasion, and the unintended consequences of Canadian tax reform|
|Keywords:||Employee compensation, stock options, personal income tax|
|Subjects:||K - Law and Economics > K3 - Other Substantive Areas of Law > K34 - Tax Law
K - Law and Economics > K4 - Legal Procedure, the Legal System, and Illegal Behavior > K42 - Illegal Behavior and the Enforcement of Law
J - Labor and Demographic Economics > J3 - Wages, Compensation, and Labor Costs > J33 - Compensation Packages; Payment Methods
H - Public Economics > H2 - Taxation, Subsidies, and Revenue > H26 - Tax Evasion
|Depositing User:||Lindsay Tedds|
|Date Deposited:||03. Jul 2012 12:37|
|Last Modified:||12. Feb 2013 02:31|
Ahmed, E., & Braithwaite, V. (2007). Higher education loans and tax evasion: A response to perceived unfairness. Law & Policy, 29(1), 121-136.
Allingham, M. G., & Sandmo, A. (1972). Income tax evasion: A theoretical analysis'. Journal of Public Economics, 1, 323-338.
Ayling, J., & Grabosky, P. (2006). Policing by command: Enhancing law enforcement capacity through coercion. Law & Policy, 28(4), 420-443.
Carpenter, J., & Remmers, B. (2001). Executive stock option exercises and inside information. The Journal of Business, 74(4), 513-534.
Compton, R. A. ., Sandler, D., & Tedds, L. M. (2009). Options backdating: A Canadian perspective. Canadian Business Law Journal, 47, 363-391.
Department of Finance. (1984). 1984 Budget, Budget Plan. Ottawa: Public Works and Government Services.
Department of Finance. (2000). 2000 Budget, Budget Plan. Ottawa: Public Works and Government Services.
Department of Finance. (2010). 2010 Budget, Budget Plan. Ottawa: Public Works and Government Services.
Donohue, J. J., & Levitt, S. (2001). The impact of legalized abortion on crime. The Quarterly Journal of Economics, CXVI(2), 379-420.
Finnie, R. (2001). The brain drain: Myth and reality - what it is and what should be done. Choices, 7(6), 3-29.
Fishman, S. (1991). Grand delusions: The unintended consequences of Vichy France's prisoner of war propaganda. Journal of Contemporary History, 26(2), 229-254.
Frank, J., & Bélair, É. (1999). South of the border: Graduates from the class of'95 who moved to the united states (Cat. No. 81-587-XPB ed.). Ottawa: Human Resources Development Canada.
Fried, J. M. (2008). Option backdating and its implications. Washington and Lee Law Review, 65, 853-886.
Hall, B. J., & Liebman, J. B. (2000). The taxation of executive compensation. Tax Policy and the Economy, 14, 1-44.
Hall, B. J., & Murphy, K. J. (2003). The trouble with stock options. The Journal of Economic Perspectives, 17(3), 49-70.
Health, C., Huddart, S., & Lang, M. (1999). Psychological factors and stock option exercise. The Quarterly Journal of Economics, 114(2), 601-627.
Helliwell, J. F., & Helliwell, D. F. (2000). Tracking UBC graduates: Trends and explanations. Isuma: Canadian Journal of Policy Research, 1(1), 101-110.
Heron, R. A., & Lie, E. (2007). Does backdating explain the stock price pattern around executive stock option grants? Journal of Financial Economics, 83(2), 271-295.
Heron, R. A., & Lie, E. (2009). What fraction of stock option grants to top executives have been backdated or manipulated? Management Science, 4(55), 513-525.
Heron, R. A., Lie, E., & Perry, T. (2007). On the use (and abuse) of stock option grants. Financial Analysts Journal, 63(3), 17-27.
Ittner, C., Lambert, R., & Larcker, D. (2003). The structure and performance consequences of equity grants to employees of new economy firms. Journal of Accounting and Economics, 34(1), 89-127.
Joulfaian, D. (2000). Corporate income tax evasion and managerial preferences. The Review of Economics and Statistics, 82(4), 698-701.
Klassen, K. J., & Mawani, A. (2000). The impact of financial and tax reporting incentives on option grants to Canadian CEOs. Contemporary Accounting Research, 17(2), 227-262.
Lie, E. (2005). On the timing of CEO stock option awards. Management Science, 51(5), 802-812.
Linck, J., Netter, J., & Yang, T. (2009). The effects and unintended consequences of the Sarbanes-Oxley act on the supply and demand for directors. The Review of Financial Studies, 22(8), 3287-3328.
Luffman, J. (2003). Taking stock of equity compensation. Perspectives on Labour and Income, 4(3), 16-23.
Mawani, A. (2003). Tax deductibility of employee stock options. Canadian Tax Journal, 51(3), 1230-1258. Merton, R. K. (1936). The unanticipated consequences of purposive social action. American Sociological Review, 1(6), 894-904.
Middlemiss, J. (2010, March 11). Siskinds research spurs options back-dating action: Canadian public companies examine their practices. The National Post. Retrieved from http://www.ottawacitizen.com/business/Siskinds+research+spurs+options+back+dating+action/2668927/story.html
Narayanan, M. P., Schipani, C. A., & Seyhun, H. N. (2007). The economic impact of backdating of executive stock options. Michigan Law Review, 105(8), 1597-1641.
Narayanan, M. P., & Seyhun, H. N. (2008). The dating game: Do managers designate option grant dates to increase their compensation? Review of Financial Studies, 21(5), 1907-1945.
Ofek, E., & Yermack, D. (2000). Taking stock: Equity-based compensation and the evolution of managerial ownership. The Journal of Finance, 55(3), 1367-1384.
Press, K. (1999, September). Editorial: Stock in Trade. Benefits Canada, 23, 7.
Sandler, D. (2001). The tax treatment of employee stock options: Generous to a fault. Canadian Tax Journal, 49(2), 259-319.
Sandler, D. (2004). Venture capital and tax incentives: A comparative study of Canada and the United States. Toronto: Canadian Tax Foundation.
Wagner, D. (2000). Do tax differences cause the brain drain? Policy Options, December, 33-41.
Walker, D. I. (2007). Unpacking backdating: Economic analysis and observations on the stock option scandal. Boston University Law Review, 87(3), 561-623.
Waller, V. (2007). The challenge of institutional integrity in responsive regulation: Field inspections by the Australian taxation office. Law & Policy, 29(1), 67-83.
Zarifa, D., & Walters, D. (2008). Revisiting Canada's brain drain: Evidence from the 2000 cohort of Canadian university graduates. Canadian Public Policy, 34(3), 305-319.