The Government proposes to integrate company and shareholder taxation from 1988/89 by taxing distributed company income at the marginal tax rates of shareholders. The scheme, known as full imputation will give shareholders a personal tax credit for company tax already paid on their dividends. It will radically change investment finance and dividend decisions.

This study, commissioned by the Institute of Policy Studies as part of its research programme on business taxation, examines the defects of the present classical compan tax system and discusses the reform options. In particular, it focusses on full imputation as the preferred option and outlines how this scheme might work in practice. It identifies important issues when redesigning the company/shareholder tax system. It provides a basis for public discussion of the best way to introduce a full imputation scheme.