{"id":13137,"date":"2016-04-14T20:57:04","date_gmt":"2016-04-15T00:57:04","guid":{"rendered":"http:\/\/goldstocksforex.com\/?p=13137"},"modified":"2016-04-14T20:57:04","modified_gmt":"2016-04-15T00:57:04","slug":"pros-and-cons-of-scrapping-dividend-imputation","status":"publish","type":"post","link":"https:\/\/thepatientinvestor.com\/index.php\/2016\/04\/14\/pros-and-cons-of-scrapping-dividend-imputation\/","title":{"rendered":"Pros and cons of scrapping dividend imputation"},"content":{"rendered":"<p>From Matthew Smith | 14 Apr 2016:<\/p>\n<blockquote><p>In a low-growth economy \u2014 which we are in \u2014 any barrier to future growth is fair game to be considered for removal, so it should come as no surprise that Australia\u2019s beloved dividend imputation system is the target of some debate.<\/p>\n<p>John McIntosh, a private investor and doyen of the finance industry, makes the case for scrapping dividend imputation along these lines: If companies are incentivized to pay dividends it takes money away from what they might otherwise use to invest to deliver future earnings.<\/p>\n<p>An already high corporate tax rate relative to the rest of the world means multinationals are using every trick in the book to avoid paying tax here, he adds. The government could reduce corporate tax by as much as 20 per cent if it was to do away with franking credits, he reckons.<\/p>\n<p>McIntosh also says the dividend imputation system is harbouring a dividend paying culture which is distorting the decision making of our corporate executives.\u201cIf you have the confidence in a corporate executive, surely you\u2019d rather have them manage the money rather than leave it in the hands of a funds manager who makes money from fees,\u201d McIntosh, who was the founding partner and chairman of McIntosh Securities before it was sold to US investment bank Merrill Lynch in 1996, says in an interview with FINSIA\u2019s InFinance.<\/p>\n<p>McIntosh joins finance luminaries including Bill Ferris, a veteran venture capitalist and chairman of Prime Minister Malcolm Turnbull\u2019s innovation and science advisory committee, along with other prominent VC investors who have been beating the drums for a review of the dividend imputation tax system.<\/p>\n<p>&#8230;..One thing we know for sure, the <a href=\"http:\/\/finsia.com\/news\/news-article\/2016\/04\/14\/jassa-the-impact-of-dividend-imputation-on-share-prices-the-cost-of-capital-and-corporate-behaviour\" target=\"_blank\">JASSA article<\/a> [by Andrew Ainsworth and Graham Partington from University of Sydney Business School Department of Finance and Geoffrey Warren from the Centre for International Finance and Regulation] explains, is the imputation system has encouraged higher dividend payouts \u2013 there\u2019s a stark divergence in the dividend payout ratios for the Australian and world equity markets after imputation was introduced.<\/p>\n<p><a href=\"http:\/\/finsia.com\/news\/news-article\/2016\/04\/14\/the-pros-and-cons-of-scrapping-dividend-imputation?mkt_tok=eyJpIjoiTjJJME1ETmxOakU1T0RJNCIsInQiOiJYWFk1cTZvMlRwMlc1OE5wbjhXNlwvc3BIdVhoZ05JdERNSGlFTzBBVzFpVTN3aW15ZXczaVphQVp6ZjFYbk1wUHNWTEJyVUJCMUN2cytJZXQwZm5aamg1QzhrdzZNU2pHUWlOd01IbEIwRU09In0%3D\"><img data-recalc-dims=\"1\" decoding=\"async\" class=\"alignnone size-full\" src=\"https:\/\/i0.wp.com\/thepatientinvestor.com\/wp-content\/uploads\/2016\/04\/dividend-payout-ratio.jpg?w=525&#038;ssl=1\" alt=\"\" \/><\/a><\/p><\/blockquote>\n<p>I am all for a flat tax system, with the same low rate (between 10 and 15%) of income tax payable by both individuals and corporations, which would make dividend imputation redundant (you simply make dividends exempt from tax). But, with the present system, it doesn&#8217;t make any sense.<\/p>\n<p>Removing dividend imputation would certainly encourage large corporations to distribute less of their profits, resulting in large risk-averse corporations with bloated balance sheets. That is not a formula for growth. Quite the opposite. And when large corporations decide to expand, many do so offshore, either because they already dominate or face fierce competition in local markets. And apart from the patchy record that Australian corporations (not just NAB) have with international investments, offshore investment won&#8217;t generate local jobs or taxes.<\/p>\n<p>What is needed is to remove the structural impediments to growth. Until we improve the tax system, over-regulation, labor practices, infrastructure, and bloated cost structures, Australia will struggle to be internationally competitive.<\/p>\n<p>In Queensland we pay 35.378 cents per Kilowatt hour for electricity, or 27 US cents (AUDUSD at 0.76). The <a href=\"http:\/\/www.eia.gov\/electricity\/monthly\/epm_table_grapher.cfm?t=epmt_5_6_a\">average price in the USA<\/a> is 12 cents with some states as low as 8 cents. That is just one of many impediments to establishing competitive industry in Australia.<\/p>\n<p>To attract industry we need to create fertile soil for them to grow.<\/p>\n<p>Source: <a href=\"http:\/\/finsia.com\/news\/news-article\/2016\/04\/14\/the-pros-and-cons-of-scrapping-dividend-imputation\">The pros and cons of scrapping dividend imputation<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>From Matthew Smith | 14 Apr 2016: In a low-growth economy \u2014 which we are in \u2014 any barrier to future growth is fair game to be considered for removal, so it should come as no surprise that Australia\u2019s beloved dividend imputation system is the target of some debate. John McIntosh, a private investor and &hellip; <\/p>\n<p class=\"link-more\"><a href=\"https:\/\/thepatientinvestor.com\/index.php\/2016\/04\/14\/pros-and-cons-of-scrapping-dividend-imputation\/\" class=\"more-link\">Continue reading<span class=\"screen-reader-text\"> &#8220;Pros and cons of scrapping dividend imputation&#8221;<\/span><\/a><\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_mo_disable_npp":"","_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[57],"tags":[],"class_list":["post-13137","post","type-post","status-publish","format-standard","hentry","category-stock-markets"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.4 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>Pros and cons of scrapping dividend imputation - the patient investor<\/title>\n<meta name=\"robots\" content=\"noindex, follow\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Pros and cons of scrapping dividend imputation - the patient investor\" \/>\n<meta property=\"og:description\" content=\"From Matthew Smith | 14 Apr 2016: In a low-growth economy \u2014 which we are in \u2014 any barrier to future growth is fair game to be considered for removal, so it should come as no surprise that Australia\u2019s beloved dividend imputation system is the target of some debate. 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I know that your readings show massively overpriced $SPX, but I believe\u2026","rel":"","context":"In &quot;Active Investing&quot;","block_context":{"text":"Active Investing","link":"https:\/\/thepatientinvestor.com\/index.php\/category\/investing\/active-investing\/"},"img":{"alt_text":"Magellan Financial Group (MFG)","src":"https:\/\/i0.wp.com\/www.incrediblecharts.com\/images\/2025\/2025-01-13-mfg.png?resize=350%2C200&ssl=1","width":350,"height":200,"srcset":"https:\/\/i0.wp.com\/www.incrediblecharts.com\/images\/2025\/2025-01-13-mfg.png?resize=350%2C200&ssl=1 1x, https:\/\/i0.wp.com\/www.incrediblecharts.com\/images\/2025\/2025-01-13-mfg.png?resize=525%2C300&ssl=1 1.5x"},"classes":[]},{"id":17828,"url":"https:\/\/thepatientinvestor.com\/index.php\/2019\/02\/04\/resmed-inc-rmd-financial-performance-fy18\/","url_meta":{"origin":13137,"position":1},"title":"ResMed Inc (RMD) &#8211; Financial Performance FY18","author":"Colin Twiggs","date":"February 4, 2019","format":false,"excerpt":"Revenue & Earnings Revenue per share grew at a compound annual growth rate (CAGR) of 11.8% between FY09 and FY18 while earnings per share (EPS) slowed noticeably in FY15 to FY17 before picking up in FY18. Earnings per share in FY18 and TTM are adjusted for US$ 138 million of\u2026","rel":"","context":"In &quot;Australian Growth&quot;","block_context":{"text":"Australian Growth","link":"https:\/\/thepatientinvestor.com\/index.php\/category\/investment-allocation\/asx-growth\/"},"img":{"alt_text":"Revenue and Earnings per share","src":"https:\/\/i0.wp.com\/www.incrediblecharts.com\/images\/2018\/rmd_1_revenue_2018-12-5.png?resize=350%2C200&ssl=1","width":350,"height":200},"classes":[]},{"id":16230,"url":"https:\/\/thepatientinvestor.com\/index.php\/2018\/05\/02\/is-gdp-doomed-to-low-growth\/","url_meta":{"origin":13137,"position":2},"title":"Is GDP doomed to low growth?","author":"Colin Twiggs","date":"May 2, 2018","format":false,"excerpt":"GDP failed to rebound after the 2008 Financial Crisis, sinking into a period of stubborn low growth. Economic commentators have advanced many explanations for the causes, while the consensus seems to be that this is the new normal, with the global economy destined to decades of poor growth. This is\u2026","rel":"","context":"In &quot;Debt Levels&quot;","block_context":{"text":"Debt Levels","link":"https:\/\/thepatientinvestor.com\/index.php\/category\/economy\/debt-levels\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":6178,"url":"https:\/\/thepatientinvestor.com\/index.php\/2012\/11\/14\/the-most-compelling-argument-for-equities-pragmatic-capitalism\/","url_meta":{"origin":13137,"position":3},"title":"The Most Compelling Argument for Equities &#124; Pragmatic Capitalism","author":"Colin Twiggs","date":"November 14, 2012","format":false,"excerpt":"Cullen Roche quotes David Rosenberg: The Fed has also completely altered the relationship between stocks and bonds by nurturing an environment of ever deeper negative real interest rates. Therein lies the rub. The economy and earnings are weak, and getting weaker, but the interest rate used to discount the future\u2026","rel":"","context":"In &quot;Earnings &amp; Dividends&quot;","block_context":{"text":"Earnings &amp; Dividends","link":"https:\/\/thepatientinvestor.com\/index.php\/category\/investing\/earnings-dividends\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":20751,"url":"https:\/\/thepatientinvestor.com\/index.php\/2020\/06\/16\/tpg-telecom-limited-tpm-2\/","url_meta":{"origin":13137,"position":4},"title":"TPG Telecom Limited (TPM)","author":"Colin Twiggs","date":"June 16, 2020","format":false,"excerpt":"Stock: TPG Telecom Limited Exchange: ASX Symbol: TPM Date: 16-Jun-20 Latest price: $8.40 AUD Market Cap: $7.8 bn Fair Value: $7.22 Forward P\/E: 31.6 FV Payback (Years): 12 Forward Dividend Yield: 0.60% Debt\/Equity: 0.60 Financial Y\/E: 31-Jul-20 Rating: ACCUMULATE* Sector: Communications Industry: Telecom Services Investment Theme: Dividends & Growth LT\u2026","rel":"","context":"In &quot;Australian Growth&quot;","block_context":{"text":"Australian Growth","link":"https:\/\/thepatientinvestor.com\/index.php\/category\/investment-allocation\/asx-growth\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":17943,"url":"https:\/\/thepatientinvestor.com\/index.php\/2019\/03\/05\/magellan-financial-group-ltd-mfg\/","url_meta":{"origin":13137,"position":5},"title":"Magellan Financial Group Ltd (MFG)","author":"Colin Twiggs","date":"March 5, 2019","format":false,"excerpt":"Stock: Magellan Financial Group Ltd Exchange: ASX Symbol: MFG Date: March 5, 2019 Latest price: $36.02 Market Cap: $6.379 bn Fair Value Estimate: $39.00 Forward P\/E: 18.05 Fair Value Payback: 12 years Financial Y\/E: June 30 Rating: Accumulate Sector: Financial Services Industry: Asset Management Investment Theme: Dividends & Growth Structural\u2026","rel":"","context":"In &quot;Australian Growth&quot;","block_context":{"text":"Australian Growth","link":"https:\/\/thepatientinvestor.com\/index.php\/category\/investment-allocation\/asx-growth\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]}],"_links":{"self":[{"href":"https:\/\/thepatientinvestor.com\/index.php\/wp-json\/wp\/v2\/posts\/13137","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/thepatientinvestor.com\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/thepatientinvestor.com\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/thepatientinvestor.com\/index.php\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/thepatientinvestor.com\/index.php\/wp-json\/wp\/v2\/comments?post=13137"}],"version-history":[{"count":0,"href":"https:\/\/thepatientinvestor.com\/index.php\/wp-json\/wp\/v2\/posts\/13137\/revisions"}],"wp:attachment":[{"href":"https:\/\/thepatientinvestor.com\/index.php\/wp-json\/wp\/v2\/media?parent=13137"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/thepatientinvestor.com\/index.php\/wp-json\/wp\/v2\/categories?post=13137"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/thepatientinvestor.com\/index.php\/wp-json\/wp\/v2\/tags?post=13137"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}