A new study commissioned by The Canadian Association of Income Funds (CAIF) and the Canadian Institute of Public and Private Real Estate Companies (CIPPREC) shows that the effect of income trusts on government tax revenues is likely neutral to net positive.

The growing public income trust sector, with a market capitalization of just under $90 billion, has recently been the subject of growing speculation as its impact on tax revenues. CAIF and CIPPREC commissioned the study last fall to put an end to the debate and develop a tax impact assessment that governments would find credible.

“This is a comprehensive and thorough study that not only provides a benchmark for determining the tax effects of income trusts on Government revenue, but shows it to be largely a non-issue,” said CAIF Chair Stephen Probyn, in a release. “It also shows income trusts are about more jobs, more growth and more investment in Canada.”

The study, Tax Revenue Impact of Income Trusts, was designed and conducted by HLB Decision Economics Inc.

“This study puts the tax revenue impact issue in a realistic light, based on the best available data and juried assumptions,” said Dr. David Lewis, President of HLB. “The risk analysis is a key and critical part of this study and we are confident that these conclusions are accurate.”

According to the study, current year tax losses to government for 2004 are estimated at about $217 million, but that doesn’t take into account the government’s increased tax revenue in the future, when accrued gains are taxed or withdrawals made from RRSPs. When those tax revenues are factored in, the tax revenue impacts are positive on a present value basis.

The study is available at the CAIF Web site.