Vale Australian dividend imputation? Some say a company tax cut from 30% to 20% is possible without it.
Australian investors were furious when told the 1.5% Paid Parental Leave levy part financing the Government's PPL policy would be un-franked. How would they react to abolition of imputation altogether?
Assume company tax drops from 30% to 20%, with no imputation. Under current personal tax rates, Australian investors' total tax on franked dividends would increase by between 10.2 and 20 percentage points. Lower income earners are worst affected. Super fund earnings tax increases between 17% (accumulation phase) and 20% (pension phase). See chart.
Foreign residents' tax on Australian franked dividends drops 10 percentage points (33%).
Chart. Cutting company tax from 30% to 20% and abolishing dividend imputation: who pays? *
* In this chart, personal tax rates include personal income tax, the Medicare levy, the NDIS levy, and the deficit levy.
Source: Geoff Carmody & Associates.
Why tax Australian shareholders more to finance tax cuts to foreign shareholders?
There is no equity case, especially for lower income Australians.
Is this efficient? Certainly, efficiency questions abound.
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