previous
next

Amount of Imputation

16.60. The Committee proposes that initially a dividend tax credit in the range from one-quarter to one-third of the dividend received might be contemplated in association with an increase in the company tax rate over the 1972–73 rate, say to 50 per cent. The cost to revenue of an imputation system involving a dividend tax credit of one-quarter on this basis would, on the assumption that it is not allowed to non-residents, life insurance companies and exempt bodies, be minimal. Whether it should be allowed to any of these is not here considered. Clearly, the cost of a one-third credit would be somewhat higher. Tables 16.D and 16.E illustrate the operation of imputation in the taxing of dividends received by shareholders on different marginal rates of personal tax when the dividend tax credits are one-quarter and one-third respectively.

16.61. The introduction of this limited imputation system is unlikely in itself to affect share prices significantly. Any tendency for share prices to rise may well be offset, perhaps more than offset, by the effects of introducing the Committee's proposals for taxing capital gains.

previous
next