“Dividend Tax and Its Implications on Shareholders”

Abstract

Dividend Tax is type of an income tax which is levied on the payments made as the dividend to the shareholders of the company paying the tax. Dividends are the shares of the profit of the company which are the given to the shareholders. The controversy arises here because dividend is nothing but the part of the profit of the company. The profit is the income of the company and a tax is paid on that income. Again, when the dividend is paid to the shareholders, a dividend tax is levied on them and so there is double taxation on the same income - once, tax is paid by the company and then the shareholder pays the tax on the same amount as well.

The dividend tax has become one of the major issues of debate in the financial market. Many of the countries are taking steps for abolishing the dividend tax as because the double taxation is not considered good for the economy. The dividend tax also poses a problem for the senior citizens and the retired personnel. Many financial experts are of the opinion that dividend tax should be abolished in order to develop the economy and a fair practice of taxation should be followed.