Franking credits should be axed

Intelligent Investor

Independent Financial Research

Franking credits should be axed. Australia's dividend imputation system promises to remove 'double taxation' but it has created problems of its own that are now more damaging than the concern they were supposed to solve. When a business pays a dividend it comes from income that has already been taxed by the corporation and it goes to the pocket of shareholders where it is taxed again. This is double taxation. Franking credits, attached to dividends when companies have paid tax in Australia, are designed to correct this problem. However, In an environment of zero global interest rates its impact has grown, distorting the operation of markets and the decisions of management. Since imputation inflates the value of dividends, people want them and companies comply. The result is that the share market is now a cash box for retirees rather than a way of business to raise capital. (VIEW LINK)


Intelligent Investor
Intelligent Investor
Independent Financial Research

Intelligent Investor is an independent financial research service with a 14-year history of beating the market. Our value investing approach empowers Australians to make more informed decisions to build their long-term wealth. We off structural...

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