Forum Archive Index - March 2000

["Mark Hubbard" <mhubbard@es.co.nz>]

From: Nick Bryant <nbryant@nbr.co.nz>
To: <sharechat@sharechat.co.nz>
Sent: 21 March 2000 12:33 PM
Subject: Re: [sharechat] charting


> Another query. Special dividends are I understand being paid at interim
> becasue of the impending new tax laws. What is the motivation and who is
> this benefitting? Also, is this the wisest use of funds by the
> companies?

It is those shareholders who will be on the highest 39% tax rate who are
benefitting - as imputation credits are to a maxium of 33% (the company tax
rate), this will leave a shortfall of tax to pay by these individuals on
dividends received by them otherwise. Thus, these companies are
theoretically distributing 'surplus' retained earnings back to the
shareholders over this 2000 tax year so they get the full advantage of
imputation credits (obviously these companies are similarly running down
their inputation credit accounts). The 39% personal tax rate applies from
the 2001 year.

Regarding is this wise, well really its 'needs must'. If they have no
immediate reinvestment projects, then I guess such companies are taking the
safest course regarding their shareholders wealth. Arguments might well be
raised that the money would be better retained in the companies to grow
them - however, such things as economic or shareholder wealth growth are
anathema to this current leftie lot we unfortunately have in. As I've said
before, the majority of my investment portfolio is now out of NZ because of
this very reason: ie, this country's competitive environment is now being
steadily dismantled.


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