THE federal government’s financial system inquiry has questioned the case for keeping dividend imputation or franking credits on shares.
The dividend imputation was introduced by the Hawke-Keating government after the tax summit in 1985 to stop profits from shareholdings being taxed twice i.e. once in the hands of the company and again in the hands of shareholders.
Dividend imputation is a powerful investment tool for many small investors and retirees, who can claim back a bonus income in this era of low interest on savings.
It also encourages companies to pay dividends, rather than retain profits and potentially waste them on poor acquisitions.
There is a push from some in the treasury and in the David Murray inquiry to do away with this system, which creates income for individuals and institutional investors including superannuation funds to invest in our domestic equities and our businesses.
With the system being of vital importance to workers, self-funded retirees and business, where is the voice of our local politicians on both sides of politics in defence of this imputation system?
The federal government has voiced its concerns about the blow-out in the provision for the aged pension, and yet the changes proposed to the imputation system would greatly exacerbate the problem.
Will the ALP defend its own creation by the Hawke government in 1987? Time will tell.
But, as Paul Keating said at the tax summit in 1985, “There is no magic pudding. There must be winners and losers.”
If we remain silent, we certainly will be the losers.
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