Taxation and the financial policy of Canadian closely-held corporations
department or school: Arts, Faculty of
department or school: Vancouver School of Economics
data provider: DSpace
degree campus: UBCV
creator: Macnaughton, Alan Robert
issued: 2010-05-02T22:50:42Z
issued: 1983
related degree: Doctor of Philosophy - PhD
degree grantor: University of British Columbia
description: Closely-held corporations differ from widely-held corporations in that there are only a few shareholders, most or all of whom participate actively in management. This implies that the objective function is the owners' utility rather than profits, and corporate behaviour is influenced by both the corporate and personal income taxes. This dissertation builds a theoretical model of a closely-held corporation based on these features and uses this model to study empirically farmers' decisions to incorporate. The theoretical model determines the financial policy of a closely-held corporation from the static utility maximization problem of its owner. The model differs from previous work in that the set of financial instruments is extended beyond taxable dividends to include owner's salary, in-kind benefits, and the change in loans from the owner. Also, the modelling of the tax system is unusually detailed and includes the special tax provisions applying to incorporated Canadian small businesses . The Kuhn-Tucker conditions for the model show that the quantities of in-kind benefits consumed by the owner will depend on prices which are adjusted for the tax consequences of the goods' purchase. For dividends, salary, and changes in the amount of shareholder's loans, a financial optimum requires that it is not possible to decrease total personal and corporate taxes paid by increasing one financial variable and decreasing another. More specific conclusions are derived from the model in two ways. First, tax rates applying in Ontario in 1980 are substituted in the Kuhn-Tucker conditions to produce graphs showing the optimal financial policy in the more common situations'. Second, linear programming is used to provide numerical examples of optimal financial policies. This information is used to illuminate a number of tax policy issues relating to closely-held corporations. Other chapters discuss the extension of the model to multiple owners, many time periods, and the decision to i…
aggregated CHO: https://circle.library.ubc.ca/rest/handle/2429/24321
note: TAXATION AND THE FINANCIAL POLICY OF CANADIAN CLOSELY-HELD CORPORATIONS by ALAN ROBERT MACNAUGHTON B.A. (Hon.), W i l f r i d L a u r i e r U n i v e r s i t y , 1976 A THESIS SUBMITTED IN PARTIAL FULFILMENT OF THE REQUIREMENTS FOR THE DEGREE OF DOCTOR OF PHILOSOPHY i n THE FACULTY OF GRADUATE STUDIES (Department o f Economics) We accept t h i s t h e s i s as conforming to the r e q u i r e d standard THE UNIVERSITY OF BRITISH COLUMBIA March 1983 (c) A l a n Robert M a c n a u g h t o n 1 9 8 3 In presenting t h i s thesis i n p a r t i a l f u l f i l m e n t of the requirements for an advanced degree at the University of B r i t i s h Columbia, I agree that the Library s h a l l make i t f r e e l y available for reference and study. I further agree that permission for extensive copying of t h i s thesis for scholarly purposes may be granted by the head of my department or by his or her representatives. I t i s understood that copying or publication of t h i s thesis for f i n a n c i a l gain s h a l l not be allowed without my written permission. Department of E c o n o m i c s The University of B r i t i s h Columbia 1956 Main Mall Vancouver, Canada V6T 1Y3 Date M a r c h 2 5 ' 1983, DE-6 (3/81) ABSTRACT C l o s e l y - h e l d c o r p o r a t i o n s d i f f e r from w i d e l y - h e l d c o r p o r a t i o n s i n t h a t there are o n l y a few s h a r e h o l d e r s , most or a l l of whom p a r t i c i p a t e a c t i v e l y i n management. T h i s i m p l i e s t h a t the o b j e c t i v e f u n c t i o n i s the owners' u t i l i t y r a t h e r than p r o f i t s , and c o r p o r a t e behaviour i s i n f l u e n c e d by both the c o r p o r a t e and p e r s o n a l income taxes. T h i s d i s s e r t a t i o n b u i l d s a t h e o r e t i c a l model of a c l o s e l y - h e l d c o r p o r a t i o n based on these f e a t u r e s and uses t h i s model to study e m p i r i c a l l y farmers' d e c i -s i o n s to i n c o r p o r a t e . The t…
has type: Thesis/Dissertation
is shown at: 10.14288/1.0095883
language: eng
degree discipline: Economics
provider: Vancouver : University of British Columbia Library
publisher: University of British Columbia
rights: For non-commercial purposes only, such as research, private study and education. Additional conditions apply, see Terms of Use https://open.library.ubc.ca/terms_of_use.
scholar level: Graduate
type: Text
identifier URI: http://hdl.handle.net/2429/24321