The Institute of Public Accountants (IPA) has reiterated its rejection of an excess franking credits ban as it prepares to appear before a parliamentary committee public hearing on the implications of the proposed policy.
“This inquiry will heighten community understanding of a well-established feature of our taxation system [and] highlight the significant implications attached to any change in government policy on refunding imputation credits,” IPA chief executive Andrew Conway said today.
“If we were designing a new tax system today, you would most likely not have full imputation where the taxation is assessed in the hands of the recipient and any excess franking credits are refunded.
“In today’s economic circumstances, it would be difficult to justify from a fiscal sustainability perspective.”
However, Conway noted the policy of refunding imputation credits has been in operation for close to two decades and removing it in a piecemeal way without dealing with the consequences would be fraught with danger.
“The case for removing dividend imputation is not strong and any tinkering needs to be assessed against some alternative benchmark tax system, such as removing dividend imputation entirely and replacing it with a discounted tax rate,” he noted.
“More importantly, we need to be looking at how we tax all forms of savings more consistently.”
He said a more holistic approach to taxing personal savings across all asset classes, as recommended by the Henry tax review, would be more beneficial than changing one aspect in isolation.
“We do not support any changes in the removal of refundable franking credits unless it is associated with more holistic tax changes to the treatment of savings more broadly,” he said.
“A survey of our members also shows that 95 per cent of respondents do not support any change.”
The House of Representatives Standing Committee on Economics inquiry into the implications of removing refundable franking credits is due to begin its public hearings on 20 November in Sydney.