“A shareholder on a marginal rate of 37 per cent would get a 20 per cent lower return, therefore reducing the value of the company’s shares to investors by 20 per cent,” said Mr Fairweather.

“Imputation is not a tax concession. It is a credit to shareholders for tax on company profits that has already been paid.”

Mr Fairweather said that without imputation, returns on investment would be double taxed, first via the corporate tax on profits and then on dividends issued to shareholders.

“This credit is only available to Australian taxpayers. So removing imputation would disadvantage Australians who invest in Australian companies and the lower tax rate gives an advantage to foreign investors,” he said.

The removal of imputation, he said, would also distort the balance between equity and debt in corporate capital raising.

“Imputation puts equity on the same effective tax basis as debt. Without full imputation, debt finance will be relatively cheaper, inevitably leading to greater use of debt funding and an increase in corporate gearing with consequent increase in risk,” he said.

“Removing or reducing the imputation credit would distort and devastate the Australian equity market. The impact on an already depressed and nervous market would be catastrophic.”

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