Can We Get Better for Less: Value for Money in Canadian Health Care

Over the past decade, Canadian health care expenditures have grown at a rate significantly higher than that of the growth in the economy and the growth in combined federal-provincial tax revenues. However, allocating an increasing amount of resources to health care does not necessarily lead to better health care, and despite significant investment, Canadians do not seem to receive sufficient value from the health care system. This paper aims to analyze the prospective rationale for emphasizing the concept of value-for-money in the largest segment of the Canadian health care system – hospitals. The results of the analysis show that a lack of activity-based or patient-based funding historically may have limited hospitals’ ability to assess their own effectiveness and efficiency. A focus on outcome measures alone may not be sufficient to assess and evaluate management for the stewardship of resources allocated to them. Outcome measures may not reflect how much value-for-money results from health care spending, while introducing incentives for improving quality of health care is not sufficient to improve efficiency of health care delivery.health care, hospitals, value-for-money measurement

Tax Planning: 2017-18

Course codes: LAW 5320 (Osgoode JD), ACTG 6730 (Schulich 6730), LAW 6730 (Osgoode LLM).https://digitalcommons.osgoode.yorku.ca/casebooks/1086/thumbnail.jp

Risk-taking incentives of executive stock options and the asset substitution problem

Various theoretical models show that managerial compensation schemes can reduce the distortionary effects of financial leverage. There is mixed evidence as to whether highly levered firms offer less stock-based compensation, a common prediction of such models. Both the theoretical and empirical research, however, have overlooked the leverage provided by executive stock options. In principle, adjusting the exercise prices of executive stock options can mitigate the risk incentive effects of financial leverage. We show that the near-universal practice of setting option exercise prices near the prevailing stock price at the date of grant effectively undoes most of the effects of financial leverage. In a large cross-sectional sample of Canadian option-granting firms, we find evidence that executives' incentives to take equity risk are negatively rather than positively related to the leverage of their employers. Copyright AFAANZ, 2004..

Foreign Direct Investment, Thin Capitalization, and the Interest Expense Deduction: A Policy Analysis

Australia, Denmark, Germany, Italy, and New Zealand have all recently adopted comprehensive restrictions on the deductibility of interest expense applicable in the context of foreign direct investment. Recently-enacted section 18.2 of the Income Tax Act (the Act), which denies the deduction of interest expense that can be traced to the earning of certain forms of exempt income in the context of outbound direct investment, is consistent with these legislative developments only in the broad sense of its attempt to impose some form of deductibility restriction. The approach chosen by the Department of Finance differs in two important respects from that in these other countries. First, it appears to be based on an assumption that different types of deductibility restrictions are required in the context of outbound and inbound direct investment, with the thin capitalization rules in subsections 18(4) to (6) applying in the latter context to limit the deduction of interest expense on debt held by significant shareholders. Second, tracing is used to link interest expense and foreign-source income in the context of outbound direct investment. The comprehensive thin capitalization regimes in Australia and New Zealand apply equally in the context of outbound and inbound direct investment, as well as equally to intra-group debt and the external debt of a multinational group. Interest expense in excess of a specified leverage ratio is denied deductibility, unless a resident corporation\u27s ratio is consistent with a multiple of the consolidated ratio of the multinational group to which it belongs. The deductibility restrictions adopted in Denmark, Germany, and Italy follow this same broad pattern, but an interest-coverage ratio, characteristic of earnings-stripping legislation, is used to specify the permissible level of interest expense. This article argues that the legislative models adopted in these particular countries are a preferable form of interest deductibility restriction in a second-best world in which tax policymakers pursue the maximization of national welfare. Although the legislative outcome is a largely symmetrical application of a comprehensive thin capitalization or earnings-stripping restriction in the context of outbound and inbound direct investment, the policy case for deductibility restrictions is somewhat different in these two contexts. The competing legislative alternatives to an unrestricted interest expense deduction are also different. As a modified form of asset apportionment, a comprehensive thin capitalization regime allows tax policymakers to realize a necessary balance between the need for revenue maintenance and the encouragement of desirable outbound and inbound direct investment. As a form of gross-revenue apportionment, a comprehensive earnings-stripping approach can realize the same balance, but there are some differences in design features that may suggest a slight preference for a comprehensive thin capitalization regime. The authors conclude with the presentation of some empirical evidence of leverage ratios of Canadian corporations which tentatively suggest a baseline in specifying a safe-harbour ratio. They believe that the Department of Finance should take the opportunity provided by the report of the Advisory Panel on Canada\u27s System of International Taxation to reconsider section 18.2, as well as the thin capitalization rules in subsections 18(4) to (6)

Dividend payout and executive compensation: theory and evidence

Bhattacharyya (2007) develops a model in which compensation contracts motivate high-quality managers to retain and invest firm earnings, while low-quality managers are motivated to distribute income to shareholders. In equilibrium, the model shows that there is a positive (negative) relationship between the earnings retention ratio (dividend payout ratio) and managerial compensation. Results of tests of US data show that executive compensation is positively (negatively) associated with earnings retention (dividend payout). Our results indicate that corporate dividend policy is perhaps best understood by considering the payout ratio (dividends divided by earnings), rather than the level of cash dividends alone. Copyright (c) 2008 The Authors. Journal compilation (c) 2008 AFAANZ.

Foreign Direct Investment, Thin Capitalization, and the Interest Expense Deduction: A Policy Analysis

Australia, Denmark, Germany, Italy, and New Zealand have all recently adopted comprehensive restrictions on the deductibility of interest expense applicable in the context of foreign direct investment. Recently-enacted section 18.2 of the Income Tax Act (the Act), which denies the deduction of interest expense that can be traced to the earning of certain forms of exempt income in the context of outbound direct investment, is consistent with these legislative developments only in the broad sense of its attempt to impose some form of deductibility restriction. The approach chosen by the Department of Finance differs in two important respects from that in these other countries. First, it appears to be based on an assumption that different types of deductibility restrictions are required in the context of outbound and inbound direct investment, with the thin capitalization rules in subsections 18(4) to (6) applying in the latter context to limit the deduction of interest expense on debt held by significant shareholders. Second, tracing is used to link interest expense and foreign-source income in the context of outbound direct investment. The comprehensive thin capitalization regimes in Australia and New Zealand apply equally in the context of outbound and inbound direct investment, as well as equally to intra-group debt and the external debt of a multinational group. Interest expense in excess of a specified leverage ratio is denied deductibility, unless a resident corporation\u27s ratio is consistent with a multiple of the consolidated ratio of the multinational group to which it belongs. The deductibility restrictions adopted in Denmark, Germany, and Italy follow this same broad pattern, but an interest-coverage ratio, characteristic of earnings-stripping legislation, is used to specify the permissible level of interest expense. This article argues that the legislative models adopted in these particular countries are a preferable form of interest deductibility restriction in a second-best world in which tax policymakers pursue the maximization of national welfare. Although the legislative outcome is a largely symmetrical application of a comprehensive thin capitalization or earnings-stripping restriction in the context of outbound and inbound direct investment, the policy case for deductibility restrictions is somewhat different in these two contexts. The competing legislative alternatives to an unrestricted interest expense deduction are also different. As a modified form of asset apportionment, a comprehensive thin capitalization regime allows tax policymakers to realize a necessary balance between the need for revenue maintenance and the encouragement of desirable outbound and inbound direct investment. As a form of gross-revenue apportionment, a comprehensive earnings-stripping approach can realize the same balance, but there are some differences in design features that may suggest a slight preference for a comprehensive thin capitalization regime. The authors conclude with the presentation of some empirical evidence of leverage ratios of Canadian corporations which tentatively suggest a baseline in specifying a safe-harbour ratio. They believe that the Department of Finance should take the opportunity provided by the report of the Advisory Panel on Canada\u27s System of International Taxation to reconsider section 18.2, as well as the thin capitalization rules in subsections 18(4) to (6)