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Stephan Dion, leader of the federal Liberal Party of Canada, promised today to roll back the tax on income trusts. Income trusts became very popular because they let companies payout a lot of their profits as taxable income to investors, allowing them to pay little corporate tax. In an attempt to stop companies from all converting to income trusts in Canada, the Conservative Party of Canada, lead by Steven Harper, introduced the tax on income trusts. The Conservatives were fearing that the Canadian treasury would be in jeparody if the trend continued.

Income trusts are scheduled to have a 31.5% tax which will not actually be introduced until the year 2011 in Canada. If the Liberals win the election in October we could see a huge rise in stocks like Telus Inc (Ticker Symbol, T.TO). Telus is one of the biggest telecommunications companies in Canada along with BCE Inc (Ticker Symbol, BCE.TO). Telus and BCE had originally decided to convert to an income trust but when the Conservatives introduced the new tax they quickly changed their mind.
Telus stock saw a one day gain of 20% when the idea of turning into an income trust became public. Could we see a mass shift in Canadian stocks back into income trusts?

Oil companies in the “Alberta Oil Sands” which pay large amounts of corporate tax could easily reduce their taxes to nill if they adopted this idea. Looking to create a higher cashflow portfolio to recession proof your portfolio a little more? Watch that Canadian election!

Kelly Parks
www.wealthforinvestors.com

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