http://canadiancouchpotato.com/2011/06/06/understanding-swap-based-etfs/Tax efficiency. The real benefit of swap-based ETFs comes when they are held in taxable accounts. Unitholders of HXT and HXS receive the full value of any dividends paid by the companies in their indexes. However, because they receive no distributions, those dividends are not taxable.
This is fundamentally different from a simple dividend reinvestment plan. Although DRIP investors collect their dividends in the form of new shares, they still get a T3 slip every year and must pay tax as though they received them in cash. With a swap-based ETF, however, no tax is payable on the dividends as long as the investor holds the fund.
Well, it seems you are under the impression that you don't pay taxes on reinvested dividends. I had read in articles that this was a thing, though I had yet to see it for reals. Anyways, you should know that you will always have to pay yearly taxes on dividends for investments that are in non-registered accounts, whether they are reinvested automatically or not.Hi,
I don't want to pay tax on distributed dividends every year.