The tax treatment of employee stock options : generous to a fault

In the 2000 budgets, both the federal and Ontario governments introduced changes to the tax treatment of employee stock options for the explicit purpose of making their tax treatment in Canada similar to or more favourable than that in the United States. The federal budget added a deferral, similar to that currently applicable to options granted by Canadian-controlled private corporations, for up to $100,000 per year of public company stock options. The Ontario budget introduced an exemption from tax for employees involved in research and development on the first $100,000 per year of employee benefits arising on the exercise of qualified stock options or on eligible capital gains arising from the sale of shares acquired by the exercise of eligible stock options. These proposals reflect the apparent acceptance by the two governments that there is a “brain drain” from Canada to the United States of knowledge workers in the “new” economy and that reductions in Canadian taxes should stem this drain. In the author’s view, the tax treatment of employee stock options, even without these changes, is overly generous. Both the federal and provincial proposals ignore the fact that most employee stock options are taxed more favourably in Canada than in the United States in any event. In particular, most employee stock option benefits in Canada are taxed at capital gains tax rates, whereas in the United States most are taxed at full rates. While the US Internal Revenue Code does provide capital gains tax treatment for certain employee stock option benefits, a number of preconditions must be met. Most important, the shares acquired pursuant to the options must be held for a minimum of one year after the option is exercised. In addition, there are monetary limits on the amount of options that qualify for capital gains treatment. In Canada, there are generally no holding period requirements or monetary limits that apply in order for the option holder to benefit from capital gains tax rates. Empirical evidence indicates that the vast majority of employees in the United States exercise their options and immediately sell the shares acquired. These “cashless exercises” do not benefit from capital gains treatment in the United States, whereas similar cashless exercises in Canada generally do. This empirical evidence suggests not only that the 2000 budget proposals are unwarranted, but also that the existing treatment of employee stock options in Canada is already more generous than that in the United States. This article begins with a theoretical “benchmark” for the taxation of employee stock options. The author suggests that employee stock options should be treated in the same manner as other income from employment. In theory, the value of the benefit should be included in income when the option is granted or vests. However, owing to the practical difficulty of valuing employee stock options, the theoretical benchmark proposed is that the value of the benefit (the difference between the fair market value of the shares acquired and the strike price under the option) be taxed when the shares are acquired, and the employer be entitled to a corresponding deduction. The employee stock option rules in Canada and the United States are then compared and contrasted with each other and the benchmark treatment. The article then examines the arguments that have been made for favourable treatment of employee stock options. Included in this critique is a review of the recent empirical work on the Canadian brain drain. Empirical studies suggest that the brain drain—if it exists at all—is small and that, despite what many newspapers and right-wing think-tanks would have us believe, lower taxes in the United States are not the cause. One study, concluding that taxes do have an effect on migration, suggests that even if Canada adopted a tax system identical to that in the United States, the brain drain would be reduced by a mere 10 percent. Indeed, even if Canada eliminated income tax altogether, it would not stop the brain drain. If governments here want to spend money in order to stem the brain drain, they should focus on other areas. For example, Canada produces fewer university graduates in the fields of mathematics, sciences, and engineering than any other G7 country except Italy. The short supply of university graduates in these fields, the apparent loss of top-calibre academics to US
universities, and the consequent lower levels of university research in these areas (an important spawning ground for new ideas in the “new” knowledge-based economy) suggest that Canada may be better served by devoting more resources to its university institutions, particularly in post-graduate programs, rather than continuing the current trend of budget cuts that universities have endured and may further endure if taxes are reduced.
As far as employee stock options are concerned, if Canada does want to look to the United States for guidance on tax reform (which it seems to do with increasing frequency of late), it should adopt the US rules applicable to nonstatutory options, which are close to the proposed benchmark treatment. In the absence of preferential tax treatment, employee stock options would still be included in compensation packages provided that there were sound business reasons for their use. No persuasive evidence has been put forward that the use of stock options, in the absence of tax incentives, is suboptimal. Indeed, the US experience suggests quite the opposite.

Fault detection service architecture for grid computing systems

The ability to tolerate failures while effectively exploiting the grid computing resources in an scalable and transparent manner must be an integral part of grid computing infrastructure. Hence, fault-detection service is a necessary prerequisite to fault tolerance and fault recovery in grid computing. To this end, we present an scalable fault detection service architecture. The proposed fault-detection system provides services that monitors user applications, grid middlewares and the dynamically changing state of a collection of distributed resources. It reports summaries of this information to the appropriate agents on demand or instantaneously in the event of failures.

The Bishop of Carpentaria and the Torres Strait pearlers' strike of 1936

The exploitation of Islander pearl divers in Torres Strait and the Queensland Government's control of divers' wages was the major cause of a strike by 400 divers in 1936. The strike was also fuelled by overall discontent with the Queensland Government's rule and a desire to be free of the Queensland Protectors. An address in 1935 by Stephen Davies, Bishop of Carpentaria, urging the Commonwealth of Australia to strip Queensland and other states of management of Island and Aboriginal affairs provided the catalyst. Davies's Torres Strait Island clergy played a pivotal role in the resistance to state control. One lasting effect of the strike lay in the introduction of elected Islander councils in 1937, but what happened subsequently allowed the perpetuation of Queensland control through the new Department of Native Affairs. The results of the strike fell short of the complete transfer to the Commonwealth that the Torres Strait pearl divers and clergy had envisaged.

Fault-tolerant dynamic job scheduling policy

In this paper, we propose a scalable and fault-tolerant job scheduling framework for grid computing. The proposed framework loosely couples a dynamic job scheduling approach with the hybrid replications approach to schedule jobs efficiently while at the same time providing fault-tolerance. The novelty of the proposed framework is that it uses passive replication approach under high system load and active replication approach under low system loads. The switch between these two replication methods is also done dynamically and transparently.

A solution for fault tolerance in replicated database systems

A distributed database system is subject to site failure and link failure. This paper presents a reactive system approach to achieving fault tolerance in such a system. The reactive system concepts are an attractive paradigm for system design, development and maintenance because it separates policies from mechanisms. In the paper we give a solution using different reactive modules to implement the fault tolerant policies and the failure detection mechanisms. The solution shows that they can be separated without impact on each other; thus the system can adapt to constant changes in environments and user requirements.

Fault detection in a cold forging process through feature extraction with a neural network

This paper investigates the application of neural networks to the recognition of lubrication defects typical to an industrial cold forging process employed by fastener manufacturers. The accurate recognition of lubrication errors, such as coating not being applied properly or damaged during material handling, is very important to the quality of the final product in fastener manufacture. Lubrication errors lead to increased forging loads and premature tool failure, as well as to increased defect sorting and the re-processing of the coated rod. The lubrication coating provides a barrier between the work material and the die during the drawing operation; moreover it needs be sufficiently robust to remain on the wire during the transfer to the cold forging operation. In the cold forging operation the wire undergoes multi-stage deformation without the application of any additional lubrication. Four types of lubrication errors, typical to production of fasteners, were introduced to a set of sample rods, which were subsequently drawn under laboratory conditions. The drawing force was measured, from which a limited set of features was extracted. The neural network based model learned from these features is able to recognize all types of lubrication errors to a high accuracy. The overall accuracy of the neural network model is around 98% with almost uniform distribution of errors between all four errors and the normal condition.

A solution for fault-tolerance in replicated database systems

A distributed database system is subject to site failure and link failure. This paper presents a reactive system approach to achieving the fault-tolerance in such a system. The reactive system concepts are an attractive paradigm for system design, development and maintenance because it separates policies from mechanisms. In the paper we give a solution using different reactive modules to implement the fault-tolerant policies and the failure detection mechanisms. The solution shows that they can be separated without impact on each other thus the system can adapt to constant changes in user requirements.

Fault-tolerant servers for anycast communication

Plenty of research has been done for any cast service, but few research touches the fault-tolerant problem based on the best of our knowledge. In this paper, we propose and analyse a fault-tolerant model, called twin server model, for anycast communication to provide reliable and continuous anycast services. We select a twin server in an anycast group for a given anycast server, the primary server. If the twin server suspects that its primary server is dead, it will take the unfinished job(s) of its primary server. We propose two algorithms: the server failure detecting algorithm and the server failure broadcasting algorithm. We then analyse the performance change when a primary server fails using queue theory and obtain some interesting conclusions. At the end, we summary the paper and present the future work.

A reactive system architecture for building fault-tolerant distributed applications

Most fault-tolerant application programs cannot cope with constant changes in their environments and user requirements because they embed policies and mechanisms together so that if the policies or mechanisms are  changed the whole programs have to be changed as well. This paper presents a reactive system approach to overcoming this limitation. The reactive system concepts are an attractive paradigm for system design, development and maintenance because they separate policies from mechanisms. In the paper we propose a generic reactive system architecture and use group communication primitives to model it. We then implement it as a generic package which can be applied in any distributed applications. The system performance shows that it can be used in a distributed environment effectively.

Slip during tension testing of Mg-3A1-1Zn sheet

The activation of slip and twinning deformation modes in Mg-3Al-1Zn alloy was investigated by means of both in-situ and ex-situ methods at ambient temperature using electron back scattering diffraction (EBSD). The results confirm the importance of non-basal slip and c-axis compression double twinning. During tensile deformation of rolled sheet, 63% of the observed slip traces were ascribed to prismatic slip, 33% to basal slip and 4% to <c+a> slip. Prismatic slip was frequently observed in grain interiors. The density of twinning was quantified in samples tested along transverse, extrusion and rolling directions at failure. The values in the range of 0.02-0.18 twins per square micron were found depending on sample orientation. The results show the effect of twinning on failure.

Pedagogy of the flesh : artaud and pedagogical fault lines

In the form of an installation, this panel will question the problems of combining the fleshiness of our bodies and the technologies of (re-)presentation in the production of knowledge that is contemporary teaching in a material environment. Do the aesthetics and methods of the performing arts open up new, dynamic approaches towards teaching practices? Conversely, how do traditional approaches to classroom management and learning undermine the performativity of our disciplinary concerns? We wish to challenge in the strongest possible terms the appropriateness of the traditional format for academic conferences with their monologic presentation of research outcomes. We crave new and unimagined formats for conferences that rely upon the very theatrical devices that we study, master, enact, and live through. This installation will express each participant's response to these provocations and will provide an interactive environment with many dialogic elements. Participants will use video images, live performers, and other theatrical devices to create an installation that deconstructs the experience of teaching. Signalling though the flames, should our teaching be any less?

The installation will be available for perusal as five simultaneous events occur in over-lapping space. This will last approximately 45 minutes and will be followed by a round-table discussion for the remainder of our time.