I was unfamiliar with the NZ legal concept of withholding tax. I was using it simply as tax withheld by a vendor,(a portion of what they pay you) that is sent directly to the government and for which you get credit when you file your final taxes.
The supplemental dividend overseas investors receive simply equals this withholding tax.
In CASE 1 you state: "You own shares in Telecom and get a 5 cent dividend that contains a 2.5 cent imputation credit and a 0.8824 supplementary dividend." What is the *gross* dividend that arrives in the mail? Is it 5 cents or 5.8824c?
The answer is 5C and the supplementary dividend would be 0.7500 and not 0.8824.
In CASE 2 you state: "You own shares in Telstra and get an 11c dividend that contains a 4.71c franking credit." What is the gross dividend that arrives in the mail. Is it 11C. Yes it is, but our franking credit would not be that high, but somewhat under that.
According to the dividend notices I receive the playing field is level with respect to U.S., Kiwi and Aussie investors, EXCEPT IN THE CASE OF TNZ, that somehow does not pass the supplemental dividend along to overseas investors.
On the size of your market question. Do you even remotely think that if all overseas investors sold all of their holdings, Kiwi investors wold buy all of the shares??? If it were possible, at what price wold the shares be purchased??? At the very least the capitalization of you market (size) would be slimmed down drastically.
If all overseas investors stopped buying NYSE shares, our market would collapse. DOW 2,000 anyone???
I guess the lesson to be learned (U.S. English) in all of this is that terms must be defined when comparing different systems.
In answer to your query on whether we have a system of imputation credits, of course the answer is no, we have double (and unfair) taxation. The Republican party has a proposal to eliminate this unfair system, which is opposed by the Democrats. Now that the Republicans control both houses of the legislature and the executive branch, the chances are good that this unfair taxation will be eliminated, UNLESS, the Democrats use obstructionist tactics and filibuster the proposal to death. (and they may do just that)
Your system has some advantages that we are deprived of. Don't follow our mistakes. I think it is better to attempt to adopt the best of each system we come into contact with, we will all be better off that way.
Hopefully we are all more enlightened than when the subject was first brought up -- that is the purpose of this forum, isn't it??
Allan
--- On Sun 12/15, tennyson@caverock.net.nz tennyson@caverock.net.nz wrote:From: tennyson@caverock.net.nz [mailto: tennyson@caverock.net.nz]To: sharechat@sharechat.co.nzDate: Sun, 15 Dec 2002 23:35:08 +0000Subject: Re: [sharechat] Overseas ans. to Supp. payments non-NZ holdersHi Allan, I just reread what I wrote and I'm not sure this bit was clear. This tax is what is termed in tax law 'witholding tax'. In other words 'witholding tax' specifically refers to the case where a company hasn't paid tax on any profits made in their own right... (please add on)... up until the point they make a dividend payment to shareholders.Then and only then does the company pay 15% of what they are paying to the shareholders directly to the government in the form of 'withholding tax'. Are you clear now what I mean 'withholding tax'?SNOOPY ---------------------------------Message sent by Snoopy e-mail tennyson@caverock.net.nzon Pegasus Mail version 2.55----------------------------------"You can tell me I'm wrong twice, but that still only makes me wrong once."----------------------------------------------------------------------------To remove yourself from this list, please use the form athttp://www.sharechat.co.nz/chat/forum/Join Excite! - http://www.excite.com The most personalized portal on the Web!
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