Franking credits should be axed

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)