COST-EFFECTIVENESS OF AFTER-TAX FINANCING: FLOW-THROUGH SHARES AND LIMITED PARTNERSHIPS

Glenn Jenkins ()

No 1988-03, Development Discussion Papers from JDI Executive Programs

Abstract: A common assumption in the economic literature when measuring the effective rate of corporation taxation or estimating the cost of capital is that all the tax incentives can be utilized by the firms in the period that the incentives are legally available to them. For this assumption to hold either the firms that receive the tax incentives must always have positive taxable income, or the government provides full and immediate refund of the tax value of taxable losses. In reality, neither of these conditions exists. The potential effectiveness of tax incentives for stimulating total investment, or even of a specific type, is greatly reduced. Two of the more popular types of after-tax financing instruments in Canada that have been designed to address this problem are flow-through shares and limited partnerships.

Keywords: after-tax financing; flow-through shares; partnerships (search for similar items in EconPapers)
JEL-codes: H25 (search for similar items in EconPapers)
Pages: 41 pages
Date: 1987-06
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