asked the Minister for Finance if he will state (a) the maximum tax rate on undistributed corporate profits and (b) the maximum tax rate paid on distributed profits and withheld by companies and the credit allowance to individual shareholders.
Written Answers. - Tax Rates on Profits.
117.
Profits of corporate bodies, whether distributed or undistributed, are chargeable to corporation profits tax and income tax. The rate of charge of corporation profits tax is 7½ per cent on the first £2,500 and 23 per cent on the balance. Income tax is chargeable at 7/- in the £, that is, 35 per cent; but, in computing profits for income tax purposes, a deduction is allowable in respect of corporation profits tax paid.
The maximum tax rate on profits over £2,500 is therefore 49,95 per cent. Where the body corporate distributes the profits by way of dividends it is entitled to deduct and retain the income tax appropriate to the dividends. Assuming the profits out of which the dividends are paid bore income tax at the 7/- rate and that tax relief such as "exports relief" is not involved, the body corporate would deduct and retain income tax at the rate of 7/-.
The dividends would be regarded as taxed income in the hands of the shareholders and would not again be subjected to income tax. They would, however, be chargeable to surtax if the shareholder's total income was sufficient to bring him into the surtax range.