The trouble with income trusts

This paper sketches broadly the efficiency and equity effects of income trusts that make their use as a substitute for the direct holding of shares of a corporation problematic for tax policy purposes. The paper also considers the potential effectiveness of an equity recharacterization rule applicable to the high-yield junk debt that is the common feature of the basic income trust structure. The author suggests that this type of narrowly focused rule would be more target-efficient than other possible responses to income trusts, such as fundamental reform of the corporate income tax or the restrictions on the holding of trust units proposed in the 2004 budget. However, a principal difficulty in designing an equity recharacterization rule is ensuring that it applies equally to structures that realize the same effect as the basic income trust structure but do not use high-yield junk debt.
The author argues that income trusts are examples of tax-driven financial innovation in the sense that they replicate an existing set of securities and therefore have no nontax rationale. These securities are essentially redundant, and the innovative process of which they are a product does not constitute “genuine” financial innovation. This essential characteristic of income trusts distinguishes them from real estate investment trusts, which arguably do not present a tax policy problem (or at least not the same one). More particularly, income trust transactions are redundant in the sense that they do not complete capital markets by providing investors with a risk and return payoff profile that is otherwise unavailable. In the absence of any efficiency gains or desirable distributional effects associated with income trusts, the available tax benefit is the subject of a defensible government response intended to eliminate it. But without any clear evidence that income trusts are substituted generally for the corporate form, any response can defensibly be limited to a narrowly targeted one that introduces a “taxlaw friction” by shifting the debt-equity boundary that is the focus of the basic income trust structure. Because the precise dividing points along this boundary lack any obvious normative content, the suggested policy focus should be the development of a legislative response that redraws the debt-equity boundary in a manner that minimizes perceived efficiency losses otherwise associated with the use of income trusts.

Are age-related variations in breeding performance greatest when food availability is limited?

Age-related improvements in reproductive performance in seabirds have been well documented, and may be explained by improvements in foraging efficiency or increased experience and reproductive effort with age. The interactive effects of parental age and food supply on reproductive performance, however, remain poorly understood. A widespread mass mortality of pilchards Sardinops sagax in southern Australian waters in 1998 provided a unique opportunity to investigate the effects of a sudden reduction in the availability of amajor prey species on Australasian gannets Morus serrator, an important local marine predator. Age-related differences in the breeding performance of gannets were evident in 1 year of reduced pilchard availability; when food was not limited, both young and experienced parents were equally capable of rearing chicks and had similar levels of breeding success. These data clearly demonstrate the interactive effects of parental age and food supply on breeding performance and suggest that such differences only become apparent when conditions become more stressful.

Isolated transactions: current income tax implications

Profits from isolated transactions will often be potentially caught by the capital gains tax provisions of the income tax legislation. Because the provisions usually tax gains at concessional rates but only apply to gains that are not otherwise taxable, it is important to determine when gains from isolated transactions constitute ordinary income. This article discusses when isolated transactions generate ordinary income, as well as briefly mentioning what statutory provisions they might be assessable under. Isolated transactions will generate ordinary income when the transaction has the sufficient indicia of a business, or when it comes under one of the strands of Commissioner of Taxation (Cth) v Myer Emporium Ltd (1987) 163 CLR 199. However, the law in this area is complex and unclear in parts. The relevant tax ruling, TR 92/3, is incomplete and at times inaccurate and so is of very limited assistance.

Can the use of foreign currency derivatives explain variations in foreign exchange exposure? Evidence from Australian companies

We investigate the role of foreign currency derivatives (FCD) in alleviating foreign exchange rate exposure of Australian firms. While there is some evidence that the use of FCD reduces the level of ex-post short-term exposure, such an effect is absent with regard to the degree of foreign operations. Our results support the view that FCDs are used to hedge existing exchange rate exposures and that Australian firms, generally, are extensively exposed to currency fluctuations in the long run. While monthly exposure appears to be a function of a firm's size and financial hedging, exchange rate exposure of shorter horizons (1 and 3 months) appears to be negatively related to a firm's price earnings ratio (proxying growth opportunities)—thereby supporting the ‘underinvestment’ hypothesis. Further, the exposure of longer horizons (12 and 24 months) is positively related to a firm's liquidity, supporting the view that liquidity is a substitute for hedging.

The relationship between national income and health : a new measure applied to Bangkok

The importance of good health of a population is crucial when determining social welfare. A new health-adjusted national income indicator that explores the relationships between economic growth, health and social welfare in Bangkok, Thailand from 1975 to 1999 is applied. This new approach to social welfare analysis is based on normative social choice theory, cost–benefit and systems analysis and is called (new)3 welfare economics. This paper argues that traditional measures of welfare, such as national income, fail to reflect accurately the impact of health on social welfare.

Regional variations in walking for different purposes : the south east Queensland quality of life study

Where people are located can influence behavioral choices and health outcomes through the effects of place on health. Walking is the most commonly reported form of nonoccupational and nonhousehold physical activity for adults. It is a behavior of particular interest to those in the transportation, urban planning, and public health fields. Researchers have examined patterns of walking from both an individual perspective (psychological and social factors) and from a broader community focus (location and built environment factors). The majority of studies have examined walking in the context of urban environments. Variations within regions (urban, periurban, and rural, for example) in walking have not been previously described. We use data from a regionally based quality of life survey to examine subregional variations in walking for particular purposes. Both the social and contextual variations that may underlie these differences are considered. This is useful in helping identify particular factors that may be further investigated in disaggregated analyses using GIS methods to identify specific differences in objective attributes between subregions that may influence peoples' choices to walk, such as walking infrastructure and the availability of destinations.

Cigarette smoking is negatively associated with family average income among urban and rural men in regional Mainland China

Socio-economic status (SES) has a strong influence on cigarette smoking behaviour. However, as a more sensitive and realistic index of SES, family average income (FAI) has little studied regarding its association with smoking. With a response rate of 90.1%, a cross-sectional study was conducted among randomly selected urban-rural participants (n  = 29,353) between October of 2000 and March of 2001 in Nanjing, China. The proportion of male participants who were current smokers was 54.7%; for females it was 2.2%. After adjustment for possible confounding variables (area of residence, age, education, occupation) males in the middle (OR 0.76; 95% CI 0.69–0.84) and higher (OR 0.64; 95% CI 0.57–0.71) FAI tertiles had lower odds of being smokers than did males in the lower FAI tertile. There were no differences by FAI category in the odds of being an ex-smoker. Therefore, current smoking among adult males is inversely associated with family average income in a regional Chinese population. FAI may inform the targeting of campaigns or other initiatives, particularly in populations where material prosperity is low in some social groups.

Seasonal variations of lipid content and composition in perna viridis

The total lipid content, composition of main lipid classes, composition of sterols and composition of fatty acids in the main glycerolipids of Perna viridis were analyzed through four seasons using TLC-FID and GLC. Mussel samples were collected during different seasons between 2003 and 2004 from Shengsi Island, Zhejiang Province, China and stored frozen prior to freeze-drying and lipid extraction. Ten grams of dried mussel powder of each season were analyzed. Total lipid content ranged from 14.5 g/100 g in spring month to 7.8 g/100 g dried mussel powder in autumn month. The predominant lipid in spring month was triacylglycerol (TAG), however, in the other three seasons the phospholipids (PL) was the main lipid class. The most abundant fatty acid in TAG, PL and phosphatidylcholine (PC) was 16:0, with the summer samples having the highest proportion (24-30% of total fatty acid) and winter the lowest (14-22%). In phosphatidylethanolamine (PE), the spring samples had the highest proportions of 16:0. The predominant polyunsaturated fatty acids (PUFA) were 22:6n-3 and 20:5n-3 in TAG, PL, PE and PC (25-40%). The proportions of 22:6n-3 and 20:5n-3 were higher in spring than in other seasons in PL and PE. There were nine sterols identified, with cholesterol being the predominant sterol, and other main ones were desmostersol/brassicasterol and 24-methylenecholesterol. Proportions of other fatty acids in different lipid fractions and the sterol compositions as well also varied seasonally. There were subject to the seasonal variations. Differences in lipid content and composition, fatty acid composition in different lipid fractions may be caused by multiple factors such as lifecycle, sex, variation of plankton in different seasons and temperature, which could influence physiological activities and metabolism.

What explains dissent on the High Court of Australia? An empirical assessment using a cointegration and error correction approach

This article examines the factors influencing the annual dissent rate on the High Court of Australia from its first full year of operation in 1904 up to 2001 within a cointegration and error correction framework. We hypothesize that institutional factors, socioeconomic complexity, and leadership style explain variations in the dissent rate on the High Court of Australia over time. The institutional factors that we consider are the Court's caseload, whether it had discretion to select the cases it hears, and whether it was a final court of appeal. To measure socioeconomic complexity we use the divorce rate, urbanization rate, and real GDP per capita. Our main finding is that in the long run and short run, caseload and real income are the main factors influencing dissent. We find that a 1 percent increase in caseload and real income reduce the dissent rate on the High Court of Australia by 0.3 percent and 0.6 percent, respectively, holding other factors constant.

Diameter variations of irregular fibers under different tensions

The cross-section area of animal fibers varies along the fiber length, and this geometrical irregularity has a major impact on the mechanical properties of those fibers. In practice fibers are often subjected to tensile stresses during processing and application, which may change fiber cross-section area. It is thus necessary to examine geometrical irregularity of fibers under tension. In this study, scoured animal fibers were subjected to different tensile loading using a Single Fiber Analyzer (SIFAN) instrument. The 3D images of the fiber specimens were first constructed, and then along-fiber diameter irregularities of the specimens were analyzed for different levels of tensile loading. The changes in effective fineness of the fiber specimens were also discussed. The results indicate that for the wool fibers examined, there is considerable discrepancy in the fiber diameter results obtained from the commonly used single scan along fiber length and that from multiple scans at different rotational angles, and that the diameter variation along fiber length increases as fiber tension increases. The results also show that when diameter reduction treatments are applied to wool by stretching, the reduced average fiber diameter is associated with an increase in both within-fiber and between-fiber diameter variations. So in terms of effective fineness, the change is much smaller than the difference between the average diameters of the parent and treated wool. These results have significant implications for improving the accuracy of fiber diameter measurement and evaluation.