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Backdating, tax evasion, and the unintended consequences of Canadian tax reform

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  • Compton, Ryan
  • Sandler, Daniel
  • Tedds, Lindsay M.

Abstract

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.

Suggested Citation

  • Compton, Ryan & Sandler, Daniel & Tedds, Lindsay M., 2010. "Backdating, tax evasion, and the unintended consequences of Canadian tax reform," MPRA Paper 39788, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:39788
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    References listed on IDEAS

    as
    1. Compton, Ryan & Sandler, Daniel & Tedds, Lindsay M., 2010. "Options backdating: a Canadian perspective," MPRA Paper 39787, University Library of Munich, Germany.
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    Cited by:

    1. Tedds, Lindsay M. & Compton, Ryan & Morrison, Caitlin & Nicholls, Christopher & Sandler, Daniel, 2012. "Learning to play by the disclosure rules: accuracy of insider reports in Canada, 1996-2010," MPRA Paper 39793, University Library of Munich, Germany.
    2. Chapman, Larry & McKenzie, Ken & Porter, Shawn & Tedds, Lindsay M., 2017. "Tax Policy Forum: Review of Tax Expenditures, Budget 2016," MPRA Paper 96926, University Library of Munich, Germany.

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    More about this item

    Keywords

    Employee compensation; stock options; personal income tax;
    All these keywords.

    JEL classification:

    • K34 - Law and Economics - - Other Substantive Areas of Law - - - Tax Law
    • K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law
    • J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods
    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance

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