TAXING DIVIDENDS.

Taihape Daily Times, Volume XI, Issue 3485, 13 May 1920, Page 3

TAXING DIVIDENDS.

Recent judicial pronouncements in England and the United States on the taxation of profits distributed among the shareholders of COlnpa,llies in the form of Ibonus shares have an instructive interest for New Zealand. According to a cablegi-am publish on Thursday, the English Court of ‘Appeal has ‘decided that such shares cannot be treated as income and are not subject to tax. Exactly the same view was taken by the United States Supreme Court a‘f‘e‘Tv weeks 'ago———though by a divided vote,of five to four, the majority judgment declaring that a dividend in the form of shares not only takes nothing from the capital of the company and adds nothing to that of the shareholder, but the antecedlent. accumulation of profits shows rthat the shareholder has not received {any income in the transaction , This }question could not have arisen in New Ezealand under the present income tax flaw, since the established systeml does not tax the dividends received} {by individual shareholders, but the, whole of the income earned by the! ,company. The English and American! judgments deserve attention, h.owever,l in View ‘of the suggestions that have} often been made, and officially (:on-: siderod at least to the extent of coliecting statistics from companies, that the New Zealand law should be‘ altere(T. The contention of course is, that indirectly the individual shai‘-’e-holder pays taxes: at 9. higer rate than his income warrants. From the point of view ofi the Treasury, the present system is; the simpler and more effective, and! weighty evidence is now given that a, change might raise serious diflicultiesi in recovering the full revenue toj which the State is entitled from the} profits of companies. i