Tax the Company and Exempt Dividends from Personal Income Tax
16.31. Taxing the company while exempting dividends from personal income tax is clearly unacceptable on equity grounds. If the company was not to be used as a tax shelter by high-income shareholders, the rate of company tax would have to be the maximum marginal rate of personal tax, in which case it would be absurdly high for the lower-income shareholder. Unless the present maximum marginal rate is substantially reduced, the rate of tax would be out of line with rates of company tax abroad. Foreign portfolio investors would be deterred from making investments in Australian companies and direct investors would seek by various devices or excess reliance on loan capital to ensure that a controlled Australian company had little or no profits.