Halloween Massacre

Written By:
Paul Tracy
Updated August 5, 2020

What is the Halloween Massacre?

In the investing world, the Halloween Massacre occurred in October 2006, when Canada began taxing all income trusts in the country.

How Does the Halloween Massacre Work?

Many oil companies created income trusts in Canada, and they issued popular high-yield securities. Before the change, the income trusts could distribute their profits to shareholders on a pretax basis.

After that date, the Canadian government began taxing the trusts like corporations and applied tax rates that were sometimes more than 30%, dramatically reducing the amount of the distributions to investors.
 

Why Does the Halloween Massacre Matter?

The Halloween Massacre was a big increase in tax revenue for the Canadian government, but it wildly devalued the investments and consequently decimated many investors' portfolios. According to one report, the Canadian energy sector lost $30 billion of value overnight.