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Today's quote:

Thursday, March 22, 2018

Franking credit refunds are fair

 

Most of the arguments against zero tax rate individuals receiving franking credits are actually arguments against the whole dividend imputation system. For if you accept that zero tax payers shouldn’t get a credit, why stop there? Why should any tax payer get franking credits to offset other tax? The answer for all is that the pre-tax earnings of the companies they own, partly via being one shareholder among many, or wholly if it is their own business, belong to them.

The company, for all shareholders irrespective of their tax rate, is simply a pooling structure. It should not pay tax on earnings it pays to the members of the pool. The fact that it does is what creates the errors of perception about the incidence of taxation, about who should pay what, that are now clouding the discussion.

The current dividend imputation system is the second-best way of fixing the error that having a company tax system has created. The best way would be to have a zero company tax rate and apply withholding tax on retained earnings and foreign shareholder distributions."   Read the whole article here.

Cuffelinks' article by Warren Bird is the most cogent argument for full refundability of franking credits I've read so far. But, of course, cogency and logic was never part of BS's tirade against franking credits (please note, 'BS' in this case stands for Bill Shorten).

The Daily Telegraph reports that there are already plans to give CFMEU slush funds and Labor-aligned campaign groups secret exemption from BS's plan to axe franking credit refunds.


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