Two new studies, one from BMO Nesbitt Burns and another from PriceWaterhouseCoopers have shown the inherent flaws and misinformation on which the Department of Finance has based its decision to tax trust distributions and to “say no” to the “Income Trust Economy”.

First BMO Nesbitt Burns issued a study: Trusts Provide Tax Gain for Government, written by Gordon Tait, an income trust analyst.  He said, “We looked at 126 businesses that converted from equities to trusts between 2001 and 2005 to prove that Ottawa reaped more, not less, tax revenue after firms converted to income trusts...We found that on average the government stood to collect 2.2 times more in taxes by taxing the distributions of the trust than had been paid by the corporations prior to their conversion.”

And then a few days later, we see a fresh report out from PriceWaterhouse.  Their findings were reported to suggest that, “A review of Canada’s more than 250 income trusts indicates that trusts have been making an important contribution to the economy, investing their capital and growing their businesses at impressive rates.”

Significant specific new conclusions included the idea that, among the 250 diverse trusts studied, there was the net income reinvestment rate with more than 200% in 2005 and almost 400% in 2004.

The author concluded that, “The data clearly refutes the notion that the income trust structure is best suited to mature, low-growth companies in stable industries.”