DIVIDEND TAX

Press, Volume CVII, Issue 31520, 7 November 1967, Page 8

DIVIDEND TAX

Maximum 35 Per Cent

Professor F. M. Henderson, professor of civil engineering at the University of Canterbury, has replied to a correspondent about taxation. Professor Henderson said:— “My attention has only.just been drawn to a letter by ‘H.L.G.’ in your issue of October 14, in which he challenges my statement (made in an address to the University’s Engineering Society) that dividends from company shares are taxed ‘at a flat 35 per cent.’ While I do not want to prolong argument on a matter on which you have already been generous in your allocation of space, I should like to correct ‘H.L.G.’ on this important question of 'act. “He stated, in effect, that if a taxpayer has an earned income large enough to attract the maximum tax rate, then any additional income in the form of dividends will be taxed at 60 per cent, not 35 per cent. *H.L.G.”s statement is incorrect. A telephone call to the Inland Revenue Department will readily verify that dividends are never taxed at more than 35 per cent, however large they may be or however large an earned income they are associated with.

“His argument to the effect that taxation on dividends is a kind of double taxation is familiar to me and, in fact. I mentioned it in my address to the Engineering Society. I also mentioned on that occasion that although the argument convinces the tax authorities of New Zealand, it does not convince those of Australia, the United Kingdom, or the United States. In all these countries dividend income is taxed at least as heavily as any form of income—as it should be.

“It may well be the case, as ‘H.L.G.’ suggests, that the capital on which the dividends are paid was earned by someone in the first instance, but this is still no reason for taxing dividends more lightly than income which is earned in direct common-sense meaning of the word. The fact that dividends are taxed more lightly in New Zealand makes nonsense of our popular belief that the welfare State, for all its faults, does not at least encourage the idle rich. It could well be argued that our taxation structure encourages idleness and discourages industry at all levels of society.”