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A Measure of the Efficacy of the Australian Imputation Tax System

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  • JOHN C. HANDLEY
  • KRISHNAN MAHESWARAN

Abstract

We examine the efficacy of the Australian imputation tax system in eliminating the double taxation of dividends. Using Australian Taxation Office data, we find that, on average, 67 per cent of distributed imputation credits were used to reduce personal taxes during 1990–2000, but this has increased to 81 per cent over 2001–2004. Overall, the policy shift to an imputation tax system has resulted in a significant elimination of double taxation. Our results are relevant not only to the ongoing policy debate concerning the efficacy of integration tax systems, but also to equilibrium asset pricing models that require an estimate of the value of imputation credits.

Suggested Citation

  • John C. Handley & Krishnan Maheswaran, 2008. "A Measure of the Efficacy of the Australian Imputation Tax System," The Economic Record, The Economic Society of Australia, vol. 84(264), pages 82-94, March.
    • Handle: RePEc:bla:ecorec:v:84:y:2008:i:264:p:82-94
    DOI: 10.1111/j.1475-4932.2008.00448.x
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    References listed on IDEAS

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    1. Matt Benge, 2001. "Corporate Financial Policy Biases and the Ralph Reforms," Australian Economic Papers, Wiley Blackwell, vol. 40(3), pages 318-333, September.
    2. Matt Benge, 1998. "Depreciation Provisions and Investment Incentives under Full Imputation," The Economic Record, The Economic Society of Australia, vol. 74(227), pages 329-345, December.
    3. Benge, Matt, 2001. "Corporate Financial Policy Biases and the Ralph Reforms," Australian Economic Papers, Wiley Blackwell, vol. 40(3), pages 318-333, September.
    4. Martin Lally & Tony Van Zijl, 2003. "Capital gains tax and the capital asset pricing model," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 43(2), pages 187-210, July.
    5. Fullerton, Don, et al, 1981. "Corporate Tax Integration in the United States: A General Equilibrium Approach," American Economic Review, American Economic Association, vol. 71(4), pages 677-691, September.
    6. Benge, Matt, 1998. "Depreciation Provisions and Investment Incentives under Full Imputation," The Economic Record, The Economic Society of Australia, vol. 74(227), pages 329-345, December.
    7. R. Glenn Hubbard, 1993. "Corporate Tax Integration: A View from the Treasury Department," Journal of Economic Perspectives, American Economic Association, vol. 7(1), pages 115-132, Winter.
    8. Matt Benge, 1997. "Taxes, Corporate Financial Policy and Investment Decisions in Australia," The Economic Record, The Economic Society of Australia, vol. 73(220), pages 1-15, March.
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    Cited by:

    1. Richard Burkhauser & Markus Hahn & Roger Wilkins, 2015. "Measuring top incomes using tax record data: a cautionary tale from Australia," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 13(2), pages 181-205, June.
    2. Mishra, Anil V. & Ratti, Ronald A., 2014. "Taxation of domestic dividend income and foreign investment holdings," International Review of Economics & Finance, Elsevier, vol. 31(C), pages 218-231.
    3. Christine Brown & Daniel Norman, 2010. "Management choice of buyback method: Australian evidence," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 50(4), pages 767-782, December.
    4. Damien Cannavan & Stephen Gray & Jason Hall, 2023. "Sampling error and the joint estimation of imputation credit value and cash dividend value," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 63(S1), pages 1029-1068, April.
    5. Charles E. Hyde, 2018. "The Piotroski F†score: evidence from Australia," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 58(2), pages 423-444, June.

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