It seems that the outcome would be a large disparity between top marginal rate, company tax rate and CGT rate and no imputation. A bit like the ’80′s before the intro of CGT and other “Rolls Royce” reforms, but for the “26A’s”.

This gave lots of oportunities for “minimization”. Are things different now to forestall this happening again?

Point is I don’t think investors would be happy campers if imputation credits were eliminated even if stock prices rose. Don’t forget elimination would cause most of this raw income to be (possibly) taxed at a higher marginal rate than before. The other point is that I think investors look at dividends and share price growth as two different things that are going on. It’s silly and not very logical but we’re human after all. There is also the effect of CGT to contend with so people are reluctant sellers if the stock prices are going higher and they have no need to sell, which they may do if dividends are taxed at the marginal rate again. Let’s not forget that dividends are double taxed anyway so we would be going back to that old game.

Moreover some of us think that corporate tax is essentially a double taxation when you consider income derived from working for corporations is assessed as personal income. We’re wealthy enough to lower the corporate tax rate and possibly sail an Irish boom of sorts amd keep our imputation credits while we figure a less complex way of taxing ourselves.

TV footage is here.

Radio coverage is here, including Keating’s “piffle” comment.

Reducing company tax to zero costs nearly $40 billion dollars. And I’m not sure that the optimal company tax is zero. It’s just lower than 30%. Since you can scrap something that we have good evidence is revenue inefficient at lowering the cost of capital, you should make that step.

Gaby, on CGT, I don’t think the proposal creates any problems there. It takes the company tax rate from a above the current rate (23.25%) to a little below it. What’s the problem? There is an ongoing issue with the extent to which the tax system subsidises debt by making it deductible at the full personal rate whilst taxing capital gains concessionally. I think that should be addressed.

But whatever you do there will be compromises. There are compromises in the current system and there are compromises whereever you end up. The art is in
1) not pretending that there is one neat clean solution to these dilemmas
2) moving from worse to better compromises.

In political terms companies don’t vote shareholders do despite the economics

Why don’t foreign companies like dividend imputation?

They get the 30% franking rebate to apply against their Australian sourced income don’t they?

If franking didn’t apply I guess they would get away with (for a tax treaty country) paying 15% or so withholding tax on their Australian dividend income.

I haven’t read the paper, and just heard a few comments on AM; but are you in favor of avoidance for foreign companies to encourage greater foreign investment?

How do you respond to Paul Keatings criticism?

The anti-avoidance measures would have to be seriously and specifically tackled as you say.

As part of your package, do you see any need to adjust capital gains tax rates? Either on general grounds, or to forestall many and various (“multi-nefarious”) obvious avoidance or even minimization schemes.