Taxation Changes and the Cross-Border Pricing of REITs

Abstract

On November 21, 2005 the Canadian government announced a reduction in the tax on dividends in an effort to neutralize the tax system’s bias in favour of income trusts. Eleven months later, on October 31, 2006, a new government changed direction and eliminated the tax deductibility of income trust distributions altogether. Exempted from this change in policy was the real estate investment trust (REIT) sector.