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Require Distribution of all Profits and Tax These Distributions

16.29. The method of requiring distributions would be the imposition of an undistributed profits tax not intended to raise revenue but to penalise a failure to distribute. Equity would be achieved. Neutrality would be restored in all respects except between retention and distribution of profits. This want of neutrality could be mitigated if the system allowed a bonus issue of shares to count as a cash distribution. The difficulties involved in regard to such bonus issues are adverted to in paragraph 16.25. A scheme of this kind, including the mitigation, was proposed in the economists’ study referred to in paragraph 1.5.

16.30. This system would have implications for the taxation of non-residents akin to those of the two systems just dismissed.

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